MinFin raises interest rates on 2Y local Eurobonds

Ukraine’s Finance Ministry raised UAH 3.7 bln and USD
62.5 mln (a total of UAH 5.4 bln in the equivalent) at its weekly bond auction
on March 26 after raising UAH 12.5 bln at the auction last week. The
government placed five types of UAH-denominated bonds with terms of maturity
ranging from four months to two years and 3M, 1Y and 2Y USD-denominated bonds.

Around a half of the UAH auction receipts – UAH 2.1
bln – came from the sale of 2Y bonds to nine bidders at 18.0%. In addition, 32
auction participants purchased 4M bonds for UAH 1.2 bln at 19.5%. Seven bidders
bought 16M bonds for UAH 520 mln at 18.25%, eight bidders bought 6M bonds for
UAH 15 mln at 19.0%, and four bidders purchased 11M bonds for UAH 3.5 mln at
18.5%. Three participants bid for 4.5Y bonds, but the government refused to
sell these bonds, apparently finding the offered interest rate of 17.0% too
high.

The government satisfied all bids for USD-denominated
bonds. The lion’s share of the USD auction receipts – USD 52.4 mln – were
raised by the sale of 2Y bonds to 13 bidders. The weighted average interest
rate for 2Y bonds increased to 7.75% from 7.5% last week. Seven bidders bought
3M bonds for USD 8.5 mln at 6.5% and 1Y bonds for USD 1.6 mln at 7.25%.

Evgeniya Akhtyrko: The
government is trying to boost demand for local Eurobonds with longer maturity
by hiking their interest rates. At the moment, this tactic has found a positive
response on the market as buyers shifted their interest to 2Y bonds from 3M
bonds, which were in highest demand previously.

As for UAH-denominated bonds, its bidders have used
this opportunity to buy more 2Y bonds, as the current coupon of 18.0% looks
very rewarding amid growing expectation that interest rates will likely decline
if the National Bank of Ukraine resorts to cutting the key policy rate in
April.