MinFin local bond receipts drop to UAH 1 bln as rates hike

Ukraine’s Finance Ministry raised UAH 1.0 bln at its
weekly bond auction on Sept. 8, compared to UAH 2.8 bln raised at the auction last week.
The auction receipts came from the placement of 1Y and 2.5Y bonds.

Around 70% of auction receipts – UAH 658 mln – came
from the sale of 2.5Y bonds to all six bidders with a weighted average interest
rate of 10.46% (vs. 10.0% for these bonds placed a month ago). MinFin also
satisfied four out of five bids for 1Y bonds for UAH 329 mln with a weighted
average interest rate of 9.28% (vs. 9.29% for these bonds last week).

Evgeniya Akhtyrko: The
receipts at the latest bond auction dropped despite the quite significant hike
of interest rates for 2.5Y bonds. The demand for 1Y at the current interest
rate was very low. MinFin’s plans also included the placement of 3M bonds but
they apparently met no demand at the market.

There is no other way for MinFin to increase the
receipts at the local bond market except to raise interest rates. However this
will distance the current cost of local debt from the central banks’ key policy rate of 6%.

Next week, MinFin is scheduled to place 6M, 1Y and 2Y
UAH-denominated bonds as well as 1.1Y USD-denominated bonds. We are likely to
see higher receipts as USD-denominated local bonds meet higher demand among
market players given excess liquidity in foreign currency held by Ukrainian
commercial banks.