Ukraine local bond auction receipts jump to UAH 2.9 bln

Ukraine’s Finance Ministry raised UAH 2.9 bln (in the
equivalent) at its weekly local bond auction held on July 10 after UAH 206 mln
raised last week. About a half of auction receipts were raised with the
placement of two-year USD denominated bonds, while the rest came from the
placement of 3M, 6M, 1.5Y and 2Y UAH-denominated bonds.

MinFin satisfied 19 out of 20 bids for 2Y local
Eurobonds for USD 59.4 mln, keeping the same interest rate of 5.65% as three
weeks ago when the comparable bonds were placed.

Three- and six-month UAH-denominated bonds remain the
most popular at the primary placement. The government satisfied all 25 bids for
3M bonds and all 13 bids for 6M bonds, drawing UAH 480.8 mln and UAH 456.1 mln,
respectively. The weighted average interest rate for 3M bonds was 17.39% (vs.
17.35% two weeks ago), while the 6M bonds were placed at 17.29%.

Meanwhile, the most interesting result of the auction
was the sale of 1.5Y and 2Y bonds for UAH 108.4 mln and UAH 296.2 bln,
respectively. Recall, the government previously rejected the bids for the bonds of this maturity,
apparently finding the interest rates too high. This time, MinFin was
successful in selling these bonds at a lower interest rate – 16.25% for both
maturities – while satisfying three out of four bids for both of the issues.

Evgeniya Akhtyrko: The receipts
of USD 59.4 mln for USD-denominated local bonds at the auction were
unexpectedly low, given a local Eurobond placement raised USD 539 mln in June.
Such a result might point to

FCY resources drying out on the Ukrainian market for
local Eurobonds.

For July, MinFin has scheduled one more placement of
1.5Y USD-denominated local bonds on July 24. Should the receipts of that
auction turn out as thin as this most recent one, gross international reserves are likely to drop
in July.

The sale of 1.5Y and 2Y UAH-denominated bonds at a
lower interest rate is a positive development, but we need more time to assess
the market’s readiness to boost investments in local bonds with longer
maturity.