MinFin keeps unchanged rates on local Eurobonds

Ukraine’s Finance Ministry raised USD 12.6 mln and UAH
15.0 mln (a total of UAH 372.8 mln in the equivalent) at its weekly local bond
auction held on Sept. 4 after attracting UAH 21.2 mln at the auction held last week.

All local Eurobonds were sold at the unified interest
rate of 5.95% – the same as for 6M local Eurobonds placed two weeks ago. The
government satisfied seven out of 13 bids for 9M local Eurobonds for USD 7.6
mln and five out of nine bids for 1.5Y local Eurbonds for USD 5.0 mln.

The demand for UAH-denominated bonds was weak as the
government satisfied all five bids for 3M notes, two bids for 6M and two bids
for 1Y at a unified interest rate of 18%. The highest UAH receipts – UAH 6.7
mln – came from the sale of 3M bonds while 6M and 1Y bonds were sold for UAH
2.0 mln and UAH 6.3 mln, respectively.

Evgeniya Akhtyrko: Keeping in
mind the latest placement of 6M international discounted notes on Aug. 23 at a yield to maturity of 9.2%,
some local market participants expected higher interest rates on local
Eurobonds. Nevertheless, the government has abstained from hiking interest
rates on FCY-denominated local debt.

The government will be offering local Eurobonds at
every weekly bond auction in September, according to an updated schedule from
the Finance Ministry. However, the weak results of the latest auction indicate
that without interest rate hikes, the government will encounter difficulty with
raising even USD 100 mln to refinance September’s redemption of previously
issued local Eurobonds.

As for UAH-denominated local bonds, the market is
waiting for the central bank’s decision regarding the key policy rate on Sept.
6. In our view, substantial deterioration of Ukraine’s current account in July added more arguments for hiking the key policy
rate from 17.5% currently.