MinFin bond auction brings record-high UAH 51 bln receipts

Ukraine’s Finance Ministry raised UAH 42.1 bln, USD
266 mln and EUR 57 mln at its weekly bond auction on Dec. 15, compared to UAH 16.0
bln (in the equivalent) at the auction last week. The auction receipts came
from the placement of 3M, 6M, 7M, 1Y, 1.5Y, 3Y and 4Y UAH-denominated bonds, 1Y
USD-denominated bonds and 1Y EUR-denominated bonds.

The largest UAH auction receipts – UAH 11.3 bln – came
from the placement of 7M bonds to 13 out of 15 bidders at 10.75%. The second
largest UAH receipts – UAH 10.1 bln – came from the sale of 6M bonds to 11 out
of 12 bidders at 10.5% (vs. 10.49% for the same bonds last week). One-year
bonds brought the highest number of bids – 40, 34 out of which were satisfied
for UAH 6.7 bln with a weighted average interest rate of 11.56% (11.22% for
these bonds last week).

The interest rate for 3M bonds didn’t change from last
week, staying at 10.0%. These bonds were sold to 22 out of 23 bidders for UAH
4.2 bln. Then, 1.5Y bonds were sold to 27 out of 28 bidders for UAH 3.8 bln
with a weighted average interest rate of 11.7%. MinFin also satisfied 30 out of
33 bids for 4Y bonds for UAH 3.1 bln with a weighted average interest rate of
12.18% (vs. 12.04% for these bonds last week). On top of that, the sale of 3Y
bonds to 20 out of 21 bidders with a weighted average interest rate of 11.98%
brought UAH 2.8 bln.

One-year USD-denominated bonds were sold to 63 out of
67 bidders with a weighted average interest rate of 3.80% (vs. 3.79% for these
bonds last week). MinFin satisfied all ten bids for 1Y EUR-denominated bonds
with a weighted average interest rate of 2.50% (vs. 2.45% for these bonds three
weeks ago).

Evgeniya Akhtyrko: Such a
fantastic result of raising UAH-denominated debt was apparently achieved due to
massive participation of nonresident investors. Most likely, nonresidents were
involved in purchasing bonds with terms of maturity of one year and higher.

Raising such high auction receipts at the year end
will help in executing ballooned budget expenditures which have been highly
underfinanced due to the government inability to raise debt for financing the
budget gap. The continuing interest of nonresident investors in the UAH debt
market is important, as the needs for financing the budget deficit will remain
high next year as well. The capacity of domestic market players is definitely
not enough to satisfy the increased government appetite for public expenditures.

It is also worth noting that 80% of receipts raised at
the latest auction came from the placements of the bonds which will mature
during next year. Therefore, the result of the latest auction is more of a
short-term fixing rather than solving the problem.