MinFin bond auction receipts jump to UAH 16 bln, as interest rates rise again

Ukraine’s Finance Ministry raised UAH 10.2 bln and USD
204 mln at its weekly bond auction on Dec. 8, compared to UAH 2.7 bln at the
auction last week. The auction receipts came from the placement of 3M, 6M, 1Y,
2Y, 3.5Y and 4Y UAH-denominated bonds as well as 1Y USD-denominated bonds.

The largest UAH auction receipts – UAH 3.3 bln – came
from the placement of 3M bonds to 11 out of 16 bidders at 10.0% (vs. 9.98% for
these bonds a week ago). The second largest UAH receipts – UAH 2.8 bln – came
from the sale of 4Y bonds to 26 out of 28 bidders with a weighted average
interest rate 12.04%. MinFin also satisfied 19 out of 20 bids for 1Y bonds for
UAH 1.9 bln with a weighted average interest rate of 11.22% (vs. 10.93% for
these bonds last week). In addition, 20 out of 21 bidders were successful in
buying 6M bonds with a weighted average interest rate of 10.49% (vs. 10.25% for
6M bonds two weeks ago).

The sale of 2Y bonds to 11 out of 13 bidders with a
weighted average rate of 11.67% brought UAH 824 mln. The rest of UAH auction
receipts – UAH 314 mln – came from the sale of 3.5Y bonds to seven bidders with
a weighted average interest rate of 11.89%.

The interest rate of 1Y USD-denominated bonds went up
to 3.79% from 3.50% for comparable bonds placed on Oct. 21. MinFin satisfied 34
of 40 bids with a cut-off rate of 3.80%; the bids ranged from 3.7% to 4.5%.

Evgeniya Akhtyrko: By and
large, the results of the latest auction are very similar to the one on Nov. 24. MinFin
managed to collect higher receipts by further hiking interest rates. However,
these receipts will not help much in financing the budget outlays, as the UAH
and USD receipts are not even enough to roll over the nearest redemption
of  USD-denominated bonds for USD 376 mln on Dec. 10 and UAH-denominated
bonds for UAH 10.3 bln on Dec. 16.

Next week, MinFin will offer 3M, 6M, 1Y and 3Y
UAH-denominated bonds as well as 1Y USD-denominated bonds. We do not rule out
that MinFin will resort to another hike of interest rates in order to maintain
the investors’ appetite and possibly to draw more attention of non-resident
investors to Ukraine’s local debt market.