MinFin offers higher interest rates on local Eurobonds

Ukraine’s Finance Ministry raised UAH 2.8 bln, USD 187
mln, and EUR 69 mln (a total of UAH 10.0 bln in the equivalent) at its weekly
local bond auction held on Aug. 7 after attracting UAH 3.1 bln at two auctions held last week.

The bond drawing the most receipts – USD 130.8 mln –
was the three-month USD-denominated note, which was bought by 16 bidders. The
rest of the receipts came from the sale of 6M USD-denominated bonds, 3M
EUR-denominated bonds, as well as 3M, 6M and 1Y UAH-denominated bonds.

The government accepted higher interest rates for its
FCY-denominated local bonds. In particular, the weighted average interest rates
for 3M and 6M USD-denominated bonds was 5.52% and 5.89% respectively (vs. 5.25%
for 6M bonds placed two weeks ago). Meanwhile, the interest rate for 3M
EUR-denominated bonds jumped to 4.39% from 4.20% two weeks ago. Notably, MinFin
satisfied all 25 bids for USD-denominated bonds and all 10 bids for
EUR-denominated bonds.

The government didn’t change the interest rates for
its UAH-denominated bond. MinFin satisfied all seven bids for 3M bonds and four
bids for 6M bonds at 18.00%. One-year bonds were sold to seven out of eight
bidders at a weighted average interest rate of 17.80%. The receipts from 3M and
6M bonds totaled UAH 1.8 bln and UAH 1.0 bln respectively. Meanwhile, 1Y bonds brought
only UAH 0.01 bln.

Evgeniya Akhtyrko: Amid the absence of external borrowing, the government had to offer
higher interest rates for its local Eurobonds in order to satisfy its foreign
curency needs. Relatively thin receipts from local Eurobond placements in July
confirmed the market would only accept higher interest rates. And with the
recent trend of hryvnia depreciation, the government has been unable to
replenish its gross international reserves by purchasing foreign currency at
the ForEx. Should the government fail to secure the IMF loan tranche,
we are likely to see further interest rate hikes for local Eurobonds.