MinFin raises UAH 17 bln at the local bond auctions, hikes interest rates again

Ukraine’s Finance Ministry raised UAH 8.4 bln, USD 261
mln and EUR 25 mln  (the total equivalent of UAH 16.7 bln) at its weekly
bond auction on Dec. 7 after raising UAH 11.0 bln and EUR 56 mln last week. The
auction receipts came from the sale of 6M, 9M, 1Y, 1.5Y, 2Y and 3Y UAH
denominated bonds, 3M USD denominated bonds as well as 6M EUR denominated
bonds.

MinFin satisfied none of eight bids for 6Y UAH
denominated bonds with interest rates demanded in the 13.00-13.25% range (vs.
12.75% placement rate for comparable bonds three week ago).

The largest UAH receipts – UAH 3.6 bln – came from the
sale of 9M bonds to eight out of nine bidders with a weighted average interest
rate of 11.49%.  In addition, MinFin satisfied 19 out of 20 bids for 1Y
bonds for UAH 2.7 bln at 11.70% (vs. 11.64% last week). Two bidders bought 6M
bonds for UAH 1.1 bln at 10.70% (the same rate as last week).

MinFin raised UAH 516 mln from the sale of 2Y bonds to
20 bidders with a weighted average interest rate of 12.64% (vs. 12.55% last
week). In addition, five out of six bidders were successful with purchasing
1.5Y bonds for UAH 487 mln with weighted average interest rates of 11.79% (vs.
11.65% last week). The least auction receipts, UAH 15 mln, came from the sale
of 3Y bonds to five bidders at 12.85% (the same rate as a week ago).

MinFin satisfied all bids for local Eurobonds. In
particular, six bidders bought USD denominated bonds at 3.50% and seven
participants bought EUR denominated bonds at 1.75%.

Evgeniya Akhtyrko: Like a week ago, higher
auction receipts is not a sign of a successful auction. The UAH receipts of the
latest auction declined, despite another hike of interest rates. More than 90%
of all auction receipts came from the sale of bonds maturing in 2022. Another
worrisome trend of the two latest auctions is the placement of local Eurobonds
with terms maturity of less than 12 months instead of one or two years as was
the case in 2021 before late November.

The local market participants are facing increasing
risks and uncertainty, while the government is responding by hiking interest
rates and offering more short-term bonds in desperate attempts to collect more
resources for covering the budget gap at the end of the fiscal year.