19 December 2011
Ukraine’s Finance Ministry sold USD 227 mln in local USD-denominated bonds (all one-year papers) in the first-ever auction of the instruments on Friday. The Finance Ministry set a cut-off yield at 9.3% (in line with the sovereign Eurobond curve). It received 19 bids– a record for recent auctions – and accepted all of them. The government failed to attract any bids for three and five-year papers. The Finance Ministry also sold UAH 102 mln (USD 13 mln) in USD-indexed bonds. Vitaliy Vavryshchuk: The results of the first auction of local USD-denominated bonds were encouraging, especially that it was held on short notice. With virtually zero interest for UAH bonds and muted demand for USD-indexed bonds, selling USD-denominated papers might help the government attract needed funds to patch the December fiscal gap. We expect demand for the new type of papers to remain reasonably strong in the next couple of weeks as banks deploy excess FX liquidity. We also think the availability of local USD-denominated bonds should stimulate banks to take in FX deposits from households, thus effectively channeling savings in FX into NBU reserves.