Yesterday, the Ministry of Finance borrowed nearly UAH5.5bn. Most of the bills had maturities over one year, continuing the trend of recent weeks to longer bills.Yesterday, the Ministry of Finance borrowed nearly UAH5.5bn. Most of the bills had maturities over one year, continuing the trend of recent weeks to longer bills.
For local-currency bills, demand and borrowings were concentrated in medium-term bills at unchanged cut-off rates, which provided the budget with nearly half of yesterday’s borrowings. The greatest demand was for two-year bills, and next were the shortest offered bills that had a four-month maturity. The Ministry rejected all bids for the four-year bills, likely due to the 17% interest rate and very small demand, which amounted to only UAH7m.
For USD-denominated bills, demand also moved to longer bills, and unlike previous auctions, demand was mostly for two-year bills, not for the three-month. But to satisfy this demand, the Ministry had to increase the cut-off rate by 25bp compared with last week’s auction.
Funds borrowed yesterday have to cover all of today’s debt repayments, despite being received in different currencies. Part of debt repayments likely was not reinvested in new local-currency bills, but probably was invested in USD-denominated bills. Nonetheless, the shift to demand for longer maturities is very important, as this has a positive impact on borrowing needs in the near future. Expectations of a NBU key policy rate cut should continue to motivate a further move into longer bills, which would allow the MoF to shift the accumulated debt burden from short-term debt to longer tenors, smoothing the debt repayment schedule.