MinFin raises UAH 1.2 bln at the local bond auction, hikes rates

Ukraine’s Finance Ministry raised UAH 1.2 bln at its
weekly bond auction on Sept. 15 after raising UAH 1.4 bln
at the auction last week. The auction receipts came from the placement of 3M,
1Y, 1.5Y, 2Y, 3Y and 5Y local currency bonds.

Half of all auction receipts – UAH 584 – came from the
sale of 1Y bonds to 17 out of 18 bidders with a weighted average interest rate
of 11.37% (vs. 11.15% for these bonds a week ago). The second largest receipts,
UAH 237 mln, came from the sale of 15M bonds to 11 bidders with a weighted
average interest rate of 11.49% (vs. 11.30% last week). In addition, MinFin
satisfied 12 out of 14 bids for 2Y bonds for UAH 220 mln at 12.09% (the same
rate as a week ago).

Eight out of ten bidders were successful in purchasing
3M bonds for UAH 87 mln at 9.50%. MinFin received  UAH 23 mln from selling
3Y bonds to all nine bidders at 12.30% (vs. 12.45% a week ago). On top of that,
5Y bonds were sold to four out of five bidders for UAH 23 mln at 12.59% (the
same rate as a week ago).

Evgeniya Akhtyrko: Being
prompted by a hike of key policy rate by 0.5 pp to
8.5% on Sept. 9, MinFin increased interest rates for 1Y and 1.5Y bonds. The
sale of these bonds collected the highest receipts, but the overall auction
receipts were even lower than those of a week ago.

The results of the recent auctions demonstrate that
the capacity of market participants in their current composition to absorb
local debt is extremely low. And the situation is not likely to change unless
the nonresident investors renew their interest in UAH denominated debt.

Next week, the government is to offer five types of
UAH denominated bonds with maturity ranging from six months to three years as
well as 2Y USD bonds. The proposal of local Eurobonds is likely to generate
higher auction receipts.