Ukraine weekly bond auction falls short of FCY needs

Ukraine’s Finance Ministry raised USD 50.3 mln from
the sale of 6M USD-denominated bonds and UAH 1.0 ln from UAH-denominated bonds,
reaching a total of UAH 2.4 bln (in the equivalent) at its weekly auction held
on Aug. 14.

The result was worst than last week, when it raised
USD 246.4 mln, EUR 69.0 mln and UAH 3.8 bln at two auctions, raising the
equivalent of UAH 12.6 bln.

MinFin satisfied 16 out of 19 bids for local Eurobonds
at 5.95%, the same interest rate as the last placement on Aug. 9. Four bidders
and eight bidders were ready to buy 1.2Y and 2Y local Eurobonds at a unified
rate of 6.50%, but the government declined their offers, apparently finding the
desired interest rate too high.

The lion’s share of UAH auction receipts came from the
sale of 3M bonds to 11 bidders at 18.00%. Three bidders bought 1Y bonds for UAH
2.8 mln at 17.90%. In addition, MinFin raised UAH 4.7 mln in satisfying two out
of four bids for 3Y bonds at 16.70%.

Evgeniya Akhtyrko: The auction
results imply that the government didn’t succeed in its attempts to collect
more foreign currency on the domestic market in order to offset the losses of
gross international reserves during August amid high repayments on FCY-denominated debt.
At the moment, receipts from the August sale of local Eurobonds total USD 246.4
mln and EUR 69.0 mln, which will be used to cover the August repayments on
previously issued local Eurobonds. Meanwhile, an IMF scheduled repayment of
about USD 600 mln is likely to be covered from reserves.

Amid improved prospects for receiving an IMF loan tranche, the government is likely to give up its attempts
to collect more foreign currency from the placement of local Eurobonds. Demand
for local Eurobonds is poor, and only higher interest rates might solve the
problem. According to MinFin’s auction schedule, the next local Eurobond
placement will be on Sept. 10.