Local bond auction receipts drop to UAH 1.5 bln

Ukraine’s Finance Ministry raised UAH 1.5 bln at its weekly bond auction on Feb. 18 after drawing the equivalent of UAH 9.2 bln at the auction last week. The auction receipts came from the placement of 5M, 18M, and 3Y bonds.

Three-quarters of auction receipts – UAH 1.2 bln – came from the placement of 18M bonds, which were sold to four out of seven bidders at a weighted average interest rate of 9.63% (vs. 9.77% for comparable bonds two weeks ago).

In addition, 11 out of 17 bidders were successful in buying 5M bonds for USD 345 mln at a weighted average interest rate of 9.82% (vs. 9.60% for the same bonds placed two weeks ago). On top of that, MinFin satisfied six out of seven bids attracting UAH 32 mln (vs. UAH 944 mln for the same bonds two week ago) at a weighted average interest rate of 10.11% (vs. 9.84% two weeks ago)

Evgeniya Akhtyrko: The drop in auction receipts and low demand for mid-term bonds imply that the market is largely limited to local investors, with the interest of nonresident investors in UAH-denominated debt having evaporated. Even the noticeable rise in interest rates for 3Y bonds was not able to attract more buyers.

By and large, these auction results confirm the weak ability of local bidders to generate inflow from the purchase of UAH-denominated local debt. In such a situation, MinFin might change its plans for local bond auction this quarter by adding the offer of local Eurobonds, which is likely to draw high demand given the large volume of idle liquidity in foreign currency held by Ukrainian banks.