UAH sovereign debt yields down and Finance Ministry attracts UAH 890 mln

At a primary sovereign bond auction yesterday, Ukraine’s Finance Ministry sold UAH 889.5 bln (USD 111.9 mln) in UAH bonds, 5.4% less than at last week’s auction. Some 91% of the placement came from bonds with maturity of less than 1 year. Mykyta Mykhaylychenko: UAH 448 mln was attracted through a placement of six month bonds at an average yield of 6.43% vs. 7.15% for the same paper two weeks earlier. 11-months paper was sold for UAH 361 mln at a 7.84% yield, down from 9% two weeks ago. Importantly, unlike the previous few auctions, yesterday the government satisfied 4-5 bids with a bid-to-cover ratio of 1.7-1.8 (1-2 bids before, bid-to-cover 20-57 for the same paper), testifying that the resultant average yields are now closer to actual market levels. The Finance Ministry is still trying to push longer-term yields down as it accepted only 1 out of 11 bids (bid to cover of 70) for 2.4-year maturity bonds at a yield of 10.75% (the worst bid came at a 12% yield). Both bids for 4.2-year bonds were accepted at 11% for a total of UAH 70 mln. We see the short-term interest rates remaining at the current low levels for some time down the road, while longer-term yields should decline as the government looks to have funded all of its financial needs for the rest of 2010-1Q11 (see our upcoming note).