MinFin bond auction receipts drop to UAH 3 bln, as interest rates rise again

Ukraine’s Finance
Ministry raised UAH 2.7 bln at its weekly bond auction on Dec. 1, compared to
UAH 16.8 bln (in the equivalent) at the auction last week. The auction receipts
came from the placement of 3M, 1Y, and 3Y bonds.

Around
three-quarters of all auction receipts – UAH 2.0 bln – came from the sale of 3M
bonds to 18 out of 19 bidders at a weighted average interest rate of 9.89%. In
addition, MinFin satisfied 17 out of 18 bids for 1Y bonds for UAH 532 mln at a
weighted average interest rate of 10.93% (vs. 10.75% for the same bonds last
week). On top of that, eight out of 13 bidders were successful in purchasing 3Y
bonds for UAH 172 mln at a weighted average interest rate of 11.62% (vs 11.10% for these bonds two weeks ago).

Evgeniya Akhtyrko: The latest auction once more
demonstrated that the capacity of the local debt market to generate new debt is
very low, save for government “tricks” like placing local Eurobonds
or appealing to market participants to at least roll over their redeemed debt.
Meanwhile, the consistent interest rate hikes for the UAH bonds haven’t helped
much so far.

Only a massive
return of nonresident investors to Ukraine’s local debt market can result in a
consistent increase of UAH auction receipts needed for budget debt financing.
However, these nonresident investors seem not to be in a rush to return, even
despite quite high interest rates.

Next week, MinFin will offer 6M, 1Y and 2Y UAH-denominated bonds and 1Y
USD-denominated bonds. Auction receipts are likely to jump, as local Eurobonds
usually find higher demand at the market.