Ukraine raises UAH 6.7 bln from local bonds

Ukraine’s Finance Ministry raised UAH 3.4 bln and USD
53.9 mln from the sale of its local bonds at its weekly bond auction on Dec. 3
after drawing UAH 2.4 bln at the auction last week.
The auction’s UAH receipts came from the sale of 3M and 3.5Y bonds, while USD
receipts were generated by the sale of 15M and 2Y bonds.

The lion’s share of the auction’s UAH receipts – UAH
3.3 bln – came from the sale of 3.5Y bonds to 14 out of 19 bidders with a
weighted average interest rate of 12.38% (vs. 12.40% for 4Y bonds placed last
week). In addition, MinFin sold 3M bonds to five out of seven bidders for UAH
55.4 mln with a weighted average interest rate of 13.06% (vs. 13.95% for the
same bonds two weeks ago).

The sale of 15M local Eurobonds to 19 out of 23
bidders brought USD 35.1 mln. The weighted average interest rate inched up to 4.08%
from 4.02% three weeks ago, but the cut-off rate of 4.25% remained the same.
The rest of USD receipts, or USD 18.8 mln, came from the sale of 15M bonds to
24 out of 30 bidders. The weighted average interest rate dropped to 3.88% –
from 5.25% for the same bonds placed on Sept. 10 – which is a historic low for
USD-denominated local bonds placed by MinFin.

Evgeniya Akhtyrko: While the
auction results look quite satisfactory, there are some noteworthy moments. The
initial MinFin schedule for this auction didn’t assume the sale of long-term
UAH denominated bonds, nor any placement of local Eurobonds. This implies that
MinFin isn’t very confident that the high demand for UAH-denominated bonds will
persist.

Indeed, most of the demand for long-term bonds is
generated by non-resident investors, who can leave the market very fast in case
their confidence deteriorates. Therefore, MinFin is seizing this moment in
which the interest for UAH-denominated long-term bonds is still high.

The goal of the latest local Eurobond placement was
likely to refinance the redemption of local Eurobonds for USD 160 mln on Dec.
12. However, the demand of market participants for local Eurobonds wasn’t high,
and now it’s not obvious that MinFin will always find satisfactory bids for its
local Eurobonds at much lower rates.