First Local Government Bond Auction Draws Only $2m.

Yesterday’s auction of local government bonds, the first since July 2005, looked like a flop as the Finance Ministry raised only $2m. The ministry sold about $1m each of two- and three-year bonds with yields of 9.0% and 9.4%, respectively. Oleksandr Klymchuk: The auction was small partly because the government’s main intent was not to raise funds but merely to test the market. Apparently the government is not yet ready to borrow at higher yields. Also, Ukrainian banks lack liquidity and potential foreign buyers are for now on the sidelines waiting to see how the government performs. The government has said it plans to raise $900m from local bond sales by the end of the year. The next auction is scheduled on Sept. 18.