MinFin raises UAH 7.5 bln from local bonds, lowers rates

Ukraine’s Finance Ministry raised UAH 7.1 bln and USD
15.9 mln (a total of UAH 7.5 bln in the equivalent) at its weekly bond auction
on June 25 after raising a total of UAH 7.9 bln (in the
equivalent) at the weekly bond auction last week. MinFin placed five types of
UAH-denominated bonds with maturity ranging from four months to six years, as
well as 1Y and 2Y USD-denominated bonds.

The highest UAH auction receipts – UAH 4.4 bln – came
from the sale of 6Y bonds to ten bidders with a weighted average interest rate
of 15.85% (vs. 15.84% two weeks ago). MinFin also satisfied five out of six
bids selling 3Y bonds for UAH 1.1 bln with a weighted average interest rate of
16.93% (vs. 17.00% three weeks ago). One-year bonds were sold to ten out of 16
bidders for UAH 0.8 bln with a weighted average interest rate of 18.33% (vs.
18.45% last week).

In addition, the government satisfied 12 out of 21
bids for 6M bonds for UAH 0.5 bln with a weighted average interest rate of
18.00% (vs. 18.34% a week ago). On top of that, the sale of 4M bonds to nine
out of 14 bidders with a weighted average interest rate of 17.50% (vs. 17.85%
last week) brought UAH 0.4 bln.

The Finance Ministry also decided to lower the
interest rate for 1Y USD-denominated bonds to 7.00% from 7.25% last week and to
7.50% from 7.75% last week for 2Y bonds. These bonds were sold to 24 out of 27
bidders for USD 12.0 mln. The rest of USD auction receipts – USD 3.8 mln – came
form the sale of 2Y bonds to 22 out of 28 bidders.

Evgeniya Akhtyrko: Apparently,
the relatively easy placement of seven-year international Eurobonds for EUR 1 bln at 6.75% last week  gave
the government enough confidence to go further by lowering interest rates at
the local debt market. Seeing that the government now has alternative sources
of attracting debt, market participants had to accept the lower interest rates.

Dropping interest rates at the local debt market is
a positive development as it lowers related budget expenditures. At the same
time, the interest rates remain relatively high so we don’t expect the
reduction will result in a significant decrease in activity at the local debt
market.