Ukraine raises UAH 2.4 bln from selling 4Y local bonds, rate drops 90 bps

Ukraine’s Finance Ministry raised UAH 2.4 bln from the
sale of its local bonds at its weekly bond auction on Nov. 26 after drawing UAH 1.3 bln at the auction last week.
Practically all auction receipts came from the sale of 4Y bonds, while the sale
of 6M bonds brought just UAH 2.4 mln.

The weighted average interest rate for 4Y bonds
dropped 90 bps to 12.4% from 13.3% three weeks ago. MinFin satisfied 24 out of
44 bids, setting the cut-off rate at 12.64%. The total volume of bids for 4Y
bonds amounted to UAH 7.7 bln, with interest rates ranging from 12.33% to
13.25%.

Meanwhile, 6M bonds were sold to the sole bidder at
14.10% (the same rate as two weeks ago). One-year bonds, which were also
offered at the auction, met no demand.

Evgeniya Akhtyrko: It looks
like MinFin was quite comfortable in slashing the interest rate for 4Y bonds,
while the volume of bids far exceeded the current government needs in financing
the budget deficit. Despite a speedy plunge of interest rates, Ukrainian local
bonds are in high demand. Indeed, this investment looks highly lucrative, given
the current consumer inflation of 6.5% yoy
and the target inflation of 5% yoy to be reached by the end of 2020.

Now, everyone is interested in how much more the
government might lower interest rates for local bonds before the demand starts
declining. The auction next week is not going to be very illustrative, as
MinFin will not offer the most desired bonds, or those with terms of maturity
of three years and longer.