Gov’t UAH debt auction: government refuses all bids

At a primary sovereign bond auction yesterday, Ukraine’s Finance Ministry rejected all bids, as it did last week. Apparently, the government now has sufficient funds to meet current budget needs. Although overall demand was up 24% from last week, still high interbank money market rates (around 5.5% for 1M funds) and jittery international markets pushed up bids: 2.5M yields fell in the range of 8.5%-9%, up from 7%-7.5% two weeks ago; 9M rates rose to 9%-10% (vs. 8.7%-9.5% two weeks ago). Bid yields for 2Y bonds were in the range of 11.5%-12.7%. Apparently, the Finance Ministry is counting on the IMF’s second tranche of USD 1.5 bln and proceeds from the Ukrtelecom privatization to come at the end of 2010 – beginning of 2011. Should either of these events be delayed or fail to come to pass, government demand for resources in the domestic market would increase.