Ukraine local weekly bond auction receipts drop to UAH 0.9 bln

Receipts dropped to UAH 0.9 bln on June 5 from UAH 2
bln last week at the weekly local bond auction held by the Ukrainian Finance
Ministry, which decided against offering foreign currency bonds. Instead,
three-month local bonds raised UAH 484 mln and six-month bonds raised UAH 418
mln.

The government satisfied all 17 bids for 3M bonds
resulting in a weighted average interest rate of 17.44% (vs. 17.41% on May 22).
Meanwhile, the weighted interest rate for 6M bonds, which were bought by seven
bidders, jumped to 17.41% from 17.23% a week ago.

MinFin left unsatisfied all three bids for 1Y bonds
with asked interest rates ranging from 17.15% to 17.50%. Recall, the latest
placement of 1Y bonds on May 15 was at 17.00%.

Evgeniya Akhtyrko: The
government agreed on an interest rate hike on its 6M bonds, bringing it closer
to the rate for 3M bonds. Like at the previous auction,
it abstained from increasing the interest rates for its longer bonds.
Obviously, market participants are appealing to the current uncertainty with
receiving the IMF loan tranche in trying to push the government to raise interest
rates for its local bonds.

We expect the demand for UAH-denominated local
bonds will be low until the uncertainty with IMF loan tranche is resolved as
the government is not likely to agree satisfy bids with significantly higher rates.
However, this shortage is likely to be compensated by relatively high demand
for FCY-denominated bonds (nearest placements are scheduled for June 12 and
June 19).