Gov’t UAH debt auction: no interest neither from government or investors

At a primary sovereign bond auction on Tuesday, Ukraine’s Finance Ministry rejected all bids and generated no funds, apparently believing that it was too expensive to borrow. As the government is scheduled to redeem bonds for UAH 1.7 bln on Wednesday, auction results again testified that the government has enough liquidity to satisfy all its current needs. At the same time, demand for public debt further declined with a total bid volume of UAH 400 mln, 43% below last week’s volume. Lower demand came on the back of increasing interbank money market rates (1M rates rose from below 3% to some 5.5% over the last month) and increased market jitters in Europe (5Y CDS for Ukraine sovereign risk rose from 520 to 540 bps), which increased risk aversion from international investors, who account for up to 25% of demand this year. Subsequently, bids for 6 month paper were in the 8.25%-9.5% YTM range, up from 6.75%-8% two weeks ago, while one year yield demand stood at 9.25%-10.5%, up from around 9% previously. Yields for 2.5 year bonds remained at 12.5%.