Ukraine MinFin raises UAH 8.4 bln from local bond auction

Ukraine’s Finance Ministry raised UAH 1.8 bln, USD
205.5 mln and EUR 35.4 mln (a total of UAH 8.4 bln in the equivalent) at its
weekly bond auction on June 4 after raising a total of UAH 3.8 bln (in the
equivalent) at the auction last week. MinFin
placed five types of UAH-denominated bonds with maturity ranging from three
months to three years, five types of USD-denominated bonds maturing in 2020 and
2021, including puttable bonds, and 6M and 12M EUR-denominated bonds.

Around one-third of UAH auction receipts – UAH 609.2
mln – came from the sale of 1Y bonds to seven bidders at 18.5%. In addition,
two bidders bought 3Y bonds for UAH 573.4 mln at 17.0%. Nine bidders bought 6M
bonds for UAH 317.2 mln with a weighted average interest rate of 18.47%. Four
bidders purchased bonds maturing in August 2021 for UAH 223.8 mln at 17.95%. On
top of that, the government satisfied six bids for 3M bonds for UAH 106.2 mln,
leaving out two bids above the cut-off rate of 18.0%.

The government satisfied all bids for bonds
denominated in foreign currency. Around the half of the USD receipts – USD
100.1 mln – came from the sale of puttable bonds with a rate of 3.85% (the same
as three weeks ago) and ultimate maturity in August 2020 to two bidders. In
addition, eight bidders bought 1Y bonds for USD 25.4 mln at 7.25%. The rest of
USD receipts – USD 1.6 mln – were brought by ten bidders purchasing 2Y bonds
with a weighted average interest rate of 7.53%.

Seven bidders bought 3M EUR-denominated bonds for EUR
18.2 mln with a weighted average interest rate of 4.52%, and eight bidders
purchased 1Y bonds for EUR 17.2 mln at 4.6%.

Evgeniya Akhtyrko: It looks
like MinFin is being quite successful in shifting investor demand to
UAH-denominated bonds with longer terms of maturity. However, the current sales
of UAH-denominated bonds are not high. And it is not clear whether or not the
government will be able to raise enough local debt at the current interest
rates in case of increasing needs in financing the state budget deficit.

The demand of auction participants for local
Eurobonds maturing in 2020 and 2021 was satisfactory. However, the government
continues to use puttable USD-denominated bonds as a less expensive alternative
to short-term local Eurobonds.