Ukraine local debt interest rates rise after key policy rate hike

The interest rates on local bonds placed at the
Ukrainian Finance Ministry’s auction on July 17 rose from previous placements
following the hike in the key policy rate
by 0.5pp to 17.5% effective July 13. The placement of 3M, 6M, 1Y and 3Y bonds
raised UAH 1.8 bln.

The interest rate for 3M bonds and 3Y bonds, which
brought almost 98% of auction receipts, increased the most. The interest rate
for 3M bonds jumped to 17.98% from 17.39% last week. Three-year bonds were
placed at 16.70% (vs. 16.15% two weeks ago). The sale of 3M bonds brought UAH
1.3 bln, while the receipts from 3Y bonds were UAH 416.3 mln.

Five auction participants bought 6M bonds for UAH 23.6
mln with a weighted average interest rate of 17.72% (vs. 17.29% in the prior
week). All four bids for 1Y bonds were accepted at an interest rate ranging
from 17.50% to 17.70% (vs. 17.25% a month ago).

Evgeniya Akhtyrko: The jump of
interest rates for local bonds was expected as soon as the central bank’s
decision on hiking the key policy rate became known. The sale of 3M and 3Y
bonds increased significantly, while the government seemed to agree easily to
the new level of interest rates in anticipation of the growth of public outlays
through the end of the year.