Ukraine raises UAH 3.1 bln from local bonds, slashes interest rates

Ukraine’s Finance Ministry raised UAH 3.1 bln at its
weekly bond auction on Nov. 5 after drawing UAH 1.6 bln at the auction
last week. It also cut significantly its interest rates for its
3M, 1Y and 4Y UAH-denominated bonds. Around three-quarters of the auction
receipts – UAH 2.3 bln – came from the sale of 4Y bonds, which were purchased
by 31 out of 78 bidders with a weighted average interest rate of 13.30% (vs.
14.75% for 5.5Y bonds placed on Sept. 24 and 15.06% for 3Y bonds placed two
weeks ago).

In addition, MinFin satisfied all seven bids for 1Y
bonds for UAH 521 mln at 14.0% (vs. 14.27% for the same bonds last week). On
top of that, ten out of 13 bidders were successful in buying 3M bonds for UAH
312 mln at 14.35% mln (vs. 15.35% for 3M bonds last week).

Evgeniya Akhtyrko:  The
demand for long-term UAH-denominated local bonds remains very high despite the
slash in interest rates.  Indeed, the current interest rates for Ukraine’s
long-term local bonds promise a very high return, given the National Bank of
Ukraine is pursuing the goal of reaching the consumer inflation
target of 5% yoy by the end of 2020. Apparently,
MinFin will try to lower interest rates until it sees demand for Ukrainian
long-term bonds declining.

Next week, the government will offer 6M, 1Y and 3Y UAH-denominated
bonds, as well as 2Y USD-denominated bonds. Most likely, the highest auction
receipts will be drawn from the sale of 3Y UAH-denominated bonds.