Ukraine MinFin raises UAH 3.6 bln from local bond auction

Ukraine’s Finance Ministry raised UAH 1.2 bln and USD
91.0 mln (a total of UAH 3.6 bln in the equivalent) at its weekly bond auction
on May 28 after raising a total of UAH 5.0 bln (in the equivalent) at the auction last week. MinFin
placed four types of UAH-denominated bonds with maturity ranging from three
months to three years, and three types of USD-denominated bonds maturing in
2020.

The government increased the interest rate for 3M
UAH-denominated bonds to 18.0% from 17.89% raising just UAH 31 mln (vs. UAH 476
mln last week). At the same time, demand for 6M bonds nearly doubled from last
week to UAH 460 mln, allowing MinFin to slightly reduce the rate on it to
18.32% (vs. 18.37% a week before). The rate for the 12M bond remained at last
week’s level of 18.50%, from which MinFin attracted UAH 713 mln.

The auction’s most successful placement was USD 74 mln
in puttable bonds with a rate of 3.85% (the same as three weeks ago) and
ultimate maturity in August 2020. USD-denominated bonds yielding 7.25% and
maturing in January and October of 2020 attracted cumulatively USD 17 mln.

Alexander Paraschiy: Not
surprisingly, investors preferred local currency bonds offering the highest
yields. We expect this trend to repeat itself in the nearest auctions. As at
the previous auctions, the buyers continued to prefer shorter, puttable bonds
to those maturing in 2020, which traditionally met little demand.

Also revealing is that demand for local currency
bonds fell to its lowest level for the entire spring, with the Clearstream
system’s launch the day before the auction not helping to boost demand. For the
summer weeks, we expect the activity on the primary bond market will remain
low. Nor do we expect any reduction in placement rates.