UAH sovereign debt auction: Gov’t needs low, no enthusiasm from demand side either

At a regular primary sovereign bond auction yesterday, Ukraine’s Finance Ministry attracted UAH 300 mln (USD 38 mln) by placing UAH bonds, 34% of the previous week’s total. The government satisfied only two bids exclusively for bonds with maturity in March 2012 at an average yield of 10.55%. Mykyta Mykhaylychenko: The Finance Ministry continues to demonstrate that it has hoarded enough cash in its coffers and even before large debt redemptions (it has to repay UAH 1 bln on November 17th and UAH 1.7 bln on November 24th) it can afford to turn down bids it considers unattractive. Simultaneously, though, demand for government UAH debt continues to be restrained (total bids equaled UAH 700 mln yesterday, some 50%-70% below the peaks in August-September); ST YTM bid ranges increased following interbank money market rates. There 1M rates breached the 5% level on Monday-Tuesday for the first time since June as since the beginning of November the banking sector lost some 17% (~UAH 5.6 bln) of its total UAH liquidity. Yesterday the Finance Ministry declined all bids for 3M paper, which came in the range of 7%-7.5% YTM, and 9M bonds (range 8.65%-9.5%). It satisfied two out of six bids for 1.5Y paper at an average yield of 10.55%, while the maximum bid came at 11.5% yield (down from 11.9% two weeks ago). We see the situation remaining broadly unchanged while