UAH sovereign bonds: 1.5Y yields down to 10.5% on 25% volume increase

At a primary sovereign bond auction yesterday, Ukraine’s Finance Ministry attracted UAH 504 mln (USD 118 mln) through UAH bonds placement, 43% below the volumes of last week’s auction. 78% of the volume was attracted through placement of 1.4Y papers, while the rest came from 3M and 8M bonds. Mykyta Mykhaylychenko: Overall auction results confirm the downward trend of the UAH yields. As the government has basically solved its liquidity problems for the nearest months (assuming receiving additional USD1bln from the IMF by the year-end – see our Note “UAH Sovereign Bonds” from 13 Oct), it may now afford to attract lower volumes through the auctions pushing yields further down. Yesterday, average yield for 1.4Y papers came to 10.45%, down from 10.75% for the same bonds two weeks ago. This time the government satisfied all the bids (9 in total) for UAH 376 mln in notional value (attracted volume was 25% up from two weeks ago) although total demand for this bonds (with maturity in March 2012) did go down 66% compared with two weeks ago (as one participant may submit several bids, we don’t rule out that the demand came from just few participants and actual market yields are still somewhat higher – somewhere closer to 11%-11.5%). Average yields for 3M papers stood at 5.5%, while 8M yield was at 7% (unchanged from two weeks ago for both numbers).