MinFin raises rates for local bonds

Ukraine’s Finance Ministry raised USD 67.0 mln from
the sale of 9M local Eurobonds and UAH 881.2 mln from the sale of 3M, 6M, 1Y,
and 2Y bonds (a total of UAH 2.8 bln in the equivalent) at its weekly local
bond auction held on Oct. 2. These are the highest weekly auction receipts
since Aug. 7.

The government satisfied all 16 bids for
USD-denominated bonds with interest rates ranging from 5.95% to 7.00%. The
weighted average interest rate amounted to 6.82%, increasing from 5.95% last week.

The lion’s share of UAH auction receipts – UAH 834.4
mln – came from the sale of 3M bonds. MinFin agreed to higher interest rates
while satisfying 17 out of 19 bids with a weighted average interest rate of
18.91% (vs. 18.50% last week). The threshold interest rate for placed 3M bonds
amounted to 19.00%.

MinFin satisfied all six bids for 6M and all six bids
for 1Y bonds at the unified interest rate of 18.50%. The sale of 6M bonds
brought UAH 12.3 mln, while 1Y bonds were sold for UAH 31.5 mln. The government
also sold 2Y bonds to one auction participant for UAH 3 mln at the interest
rate of 17.25%, while the other six bids were left unsatisfied.

Evgeniya Akhtyrko: Very low receipts
from September’s bond auctions has resulted in difficulties with deficit
financing this month. Without access to other sources of deficit financing
(i.e. external markets or privatization proceeds), the government resorted to
raising interest rates for bonds at this latest auction in order to revive the
domestic bond market.

The government is likely to keep higher interest
rates for UAH-denominated bonds with the shortest maturity term. The interest
rate of 7% for USD-denominated bonds is likely to be maintained until the situation with IMF financing is
positively resolved.