MinFin weekly local bond receipts jump to UAH 7 bln

Ukraine’s Finance Ministry raised USD 135 mln and UAH
3.4 bln (the equivalent of UAH 7.2 bln) at its weekly bond auction on Oct. 6,
compared to UAH 2.0 bln at the auction last week.
The auction receipts came from the placement of 6M USD-denominated bonds and
3M, 1Y and 3Y bonds.

The USD bonds were sold to 24 out of 27 bidders at
3.39%. MinFin satisfied all seven bids for 3M UAH bonds for UAH 1.6 bln with a
weighted average interest rate of 7.19% (vs. 7.0% for three-month bonds placed
two weeks ago). The 1Y UAH bonds were sold to 11 out of 12 bidders for UAH 1.1
bln with a weighted average interest rate of 9.89% (vs. 9.5% for these bonds
last week). The rest of auction receipts – UAH 729 mln – came from the sale of
3Y bonds to all six bidders with a weighted average interest rate of 10.95%
(vs. 10.5% for these bonds two weeks ago).

Evgeniya Akhtyrko: Like a week
ago, MinFin hiked the interest rates for UAH-denominated bonds. However, that
didn’t result in a significant jump of UAH auction receipts. And we suppose
that the most of the UAH auction receipts were generated by state-owned banks. As
usual, the demand for local Eurobonds was relatively high and this helped to
boost overall receipts.

Next week, the government plans to place 6M, 1Y and
2Y UAH-denominated bonds. We believe the government needs to hike the interest
rates for local bonds by at least 100 bps to revive demand for UAH-denominated
debt. However, the government is not likely to rush with such a move. Rising
interest rates amid the relatively low inflation means the current government policy is failing to
improve business confidence.