MinFin raises UAH 18 bln from local bonds as interest rates drop

Ukraine’s Finance Ministry raised UAH 7.2 bln and EUR 353
mln at its weekly bond auction on June 9 after raising UAH 2.9 bln at the auction last week.
The UAH auction receipts came from the placement of 3M, 6M, 9M, 12M and 18M
bonds, while the EUR receipts came from the placement of 12M bonds.

The largest UAH receipts – UAH 5.8 bln – came from the
purchase of 18M bonds by seven out of eight bidders at 10.8%. MinFin satisfied
five out of 11 bids for 3M bonds for UAH 527 mln at 9.0% (vs. 9.8% for the same
bonds last week). In addition, four out of 11 bidders were successful in buying
6M bonds for UAH 475 mln at 9.5% (vs. 10.1% for these bonds last week).

The rest of UAH auction receipts came from the sale of
9M and 12M bonds. In particular, the government satisfied seven out of eight
bids for 9M bonds for UAH 205 mln with a weighted average interest rate of
10.7% (vs. 10.9% for these bonds at the auction last week). On top of that, six
out of eight bidders were successful in purchasing 12M bonds for UAH 207 mln
with a weighted average interest rate of 10.7% (vs. 10.9% for these bonds last
week).

MinFin satisfied all 19 bids for 1Y EUR denominated
bonds for EUR 353 mln at 2.20% (vs. 2.22% for these bonds placed on Mar. 24).

Evgeniya Akhtyrko: The
relatively high demand for 18M bonds implies that market participants are
trying to jump onto a leaving train amid the expectations that the interest
rates in Ukraine will decline further. Nevertheless, the relatively low
receipts from the short-term bonds imply that the market capacity for buying
UAH debt is still not that high at the moment. Therefore, MinFin is likely to
use new issues of local Eurobonds as a wild card during moments of intensified
needs.

Next week, MinFin is to offer local bonds with
terms of maturity ranging from six to 18 months. The market expects the NBU to
cut its key policy rate. And this is likely to spur a further decline of
interest rates at the primary local debt market.