UAH public debt primary auction – zero volume again

On Tuesday, the Finance Ministry held its scheduled UAH debt primary auction. For the third time in a row, it did not attract any resources. Mykyta Mykhaylychenko: On one hand, the government still has enough resources for its current needs to afford to reject unattractive bids. On the other hand, the bids have stayed quite high in terms of yields, while volumes quite low (UAH 145 mln, 71% lower than a week ago) on the back of continuing deterioration on the local interbank money market (1M rates there breached 8% for the first time since March 2010). Specifically, 6M yield bids fell in the range 10.5%-11% (vs. 8.3%-9.5% two weeks ago), 1Y within 10%-12.6%, while the single bid for 2.3Y papers came in at 14.9% YTM (vs. 12%-13% range weeks ago). We see the government as having sufficient cash in coming months (assuming disbursal of the USD 1.5 bln IMF tranche within the next few months and privatization of Ukrtelecom), while the money market situation might improve somewhat by yearend should the National Bank of Ukraine let its outstanding CDs mature (for a total of UAH 8.3 bln by end-2010) without issuing the new ones and as the government will free cash from its treasury account at the NBU through regular budget outlays at the end of the year (which are seasonally high).