Ukraine MinFin raises rates for local bonds

Ukraine’s Finance
Ministry sold 20-month
local Eurobonds for USD 234.3 mln at its weekly bond auction held on June 12.
MinFin also placed 3M, 6M, 10M, 1Y and 3Y UAH-denominated bonds at a total
amount of UAH 1.2 bln, bringing total auction receipts to UAH 7.4 bln (in the
equivalent).

The government satisfied
27 out of 30 bids for 20-month local Eurobonds with a weighted average interest rate
of 5.62%. Recall, 21-month local Eurobonds were placed at 5.60% while 18-month local Eurobonds yielded 5.32% at the
auction held on May 22.

Two-thirds of
hryvnia auction receipts were raised by the placement of 3M and 6M bonds.
MinFin satisfied seven of eight bids for 3M bonds for UAH 485 mln at 17.44%,
the same interest rate as one week ago. Three auction participants bought 6M
bonds for UAH 463 mln at 17.25% (vs. 17.23% on May 29).

The interest rates
for longer UAH-denominated bonds increased amid pretty weak demand. In
particular, the interest rate for 3Y bonds, which were bought by six bidders
for UAH 144 mln, inched up to 16.14% from 16.10% three weeks ago. One-year
bonds were placed at 17.25% (vs 17.00% previously) bringing UAH 90 mln to
three bidders. The interest rate for 10M bonds was 17.30%.

Evgeniya Akhtyrko: Local bond buyers continue to
prefer foreign currency-denominated local bonds over UAH-denominated ones.
Meanwhile, the government, which has had a shortage of foreign currency inflow,
has had to concede to buyers higher interest rates for local Eurobonds in order
to keep its gross international reserves at an acceptable level.

We expect the
government to attract another USD 200-300 mln from local Eurobond placements in
June. The higher interest rates for longer UAH-denominated local bonds likely
points to a government attempt to shift market demand away from 3M and 6M bonds,
which enjoy the most
demand currently.