Government To Restart Bond Auctions

According to Deputy Finance Minister, Andrey Kravets, the government will renew its local bond auctions in the near future. Five instruments are going to be offered with two, three, five, seven and 10-year maturities; the plan is to attract UAH 3.8 bln (USD 750 mln) by the end of the year. He also announced that the Finance Ministry and the NBU are going to introduce the institute of primary dealers in governmental securities, the dealers will, among other things, provide liquidity on the secondary market. No details on exact dates or entities that can be primary dealers were given. Oleksandr Klymchuk: With no threat of devaluation on the horizon and healthy local liquidity, the government has a good chance to borrow under favorable terms locally and meet the plan for borrowing in 2007, contrary to the previous year when the government attracted only 35% of the planned amount. We believe, that one of the state-owned banks (Ukreximbank or Oshchadbank) will act as the liquidity provider for government securities, although the authorities didn’t announce who they plan to grant the status of primary dealers to. The government is also looking at the possibility of buying back previously issued securities that are illiquid on the secondary market. We welcome these qualitative developments as they will help the government to attract new investors, improve liquidity on the secondary market and provide market participants with reliable benchmarks.