UAH sovereign bonds: yields heading south with volumes up

At a primary sovereign bond auction yesterday, Ukraine’s Finance Ministry sold UAH 941 mln (USD 118 mln) in UAH bonds, 15 times the volume of last week’s auction. The volumes were evenly spread across three different maturities (3M, 9M, 1.5Y). Mykyta Mykhaylychenko: As it was the last week, MinFin again accepted only one or two bids for every bond issue. Hence, we see actual market rates as somewhat higher than average action yields. Nonetheless, as bids with the highest yields did go south, so did UAH sovereign yields as well, with 9M yields are now closer to 7%, while 1.5Y rates – 11%-12%. Specifically, the 3M yield averaged 5.5%, 50 bps lower than two weeks ago while the lowest bid (with the highest YTM) declined from 8% to 7%. The 9M average yield fell from 9.25% to 7% over two weeks (the max YTM declined from 11% to 7%). For the first time in quite some time, the government managed to place 1.5Y (not Euro 2012) paper. The yields averaged 10.75%, while the lowest bid yielded 12%. The government faces UAH 5.2 bln in local bond maturing by year-end (incl. UAH 2.2 bln in October), so we expect it to continue tapping the market actively with UAH bond placements through year-end