Local bond auction raises UAH 5 bln for Ukraine state budget

Ukraine’s Finance Ministry raised UAH 5.0 bln (in the
equivalent) at its weekly local bond auction held on July 24 after UAH 1.8 bln
was raised last week. About three-quarters of auction receipts were raised with
the placement of USD- and EUR-denominated bonds, while the rest came from the
placement of 3M and 2Y UAH-denominated bonds.

The government, hungry for foreign currency, offered a
wide range of FCY-denominated local bonds for sale. The highest foreign
currency receipts – EUR 60.5 mln – were brought by six bidders who bought 1Y
euro-denominated bonds with a weighted average interest rate of 4.20%. The USD
auction receipts, which amounted to USD 71.5 mln, came from the placement of 6M
(USD 16.0 mln at 5.10%), 9M (USD 29.9 mln at 5.25%) and 18M (USD 25.6 mln at
5.55%) bonds. Meanwhile, the MinFin refused to satisfy eight bids for 2Y bonds
that demanded an interest rate of 6.00%.

The government satisfied all 19 bids for 3M and three
bids for 2Y UAH-denominated bonds, which were sold for UAH 1.1 bln and UAH 60
mln respectively. Interestingly, all bidders for UAH-denominated bonds demanded
the same interest rates – 18.0% for 3M and 16.8% for 2Y.

Evgeniya Akhtyrko: The thin
receipts from the local Eurobond placement two weeks ago made the
government diversify the offer of FCY-denominated bonds while the preliminary
auction schedule prescribed the placement solely of 1.5Y USD-denominated bonds.
Higher FCY-receipts were needed to cover the July currency outflow related to
repayments on local Eurobonds of USD 230 mln in order to avoid a significant
drop in gross foreign reserves given the lack of other sources for foreign
currency inflow.

The rates of 18.0% and 16.8% for UAH-denominated
bonds are likely to be viewed as yield benchmarks under the new central bank key policy interest
rate of 17.5%.