Since the MoF stopped offering five-year notes, demand is now concentrating in the three-year note, the longest offered maturity. Yesterday's auction of three-year notes provided the budget with 98% of the UAH2.15bn proceeds raised.
Once again, short-term bills received insufficient demand and provided the budget with only UAH34.75m. The 12-month bills received only three non-competitive bids, and required the MoF's decision to use the rate from the previous auction at 15.09% to accept demand. At the same time, the MoF was not in a hurry to sell six-month bills, as it rejected most of demand from only one bid. Out of UAH167.4m of demand, the MoF accepted only UAH27.4m (par value), decreasing rates to 15.65%-the cut off rate by 25bp, and weighted-average rate by 24bp.
At the same time, demand for the three-year notes exceeded the offered amount, despite being lower than three weeks ago. Out of UAH2.9bn of demand in 20 bids, the MoF accepted 16 bids and sold UAH2bn of notes (par value), the amount offered. This decision allowed the MoF to decrease the cut-off rate by 20bp to 15.5%, and the weighted-average rate by 10bp to 15.42%.
The gradual decline in foreign investors' portfolios seen last week may accelerate due to today's redemption of UAH5.9bn of local-currency bills. Notes purchased yesterday by this group of investors can only partially compensate outflows from local-currency debt in anticipation of more attractive maturities and uncapped amounts.
