On Aug.1 , the MoF rejected a large part of demand and decreased interest rates for all offered securities, including "reserve" notes.
Demand for ordinary and military bills was expectedly low and accepted partially.
The MoF accepted five out of nine bids for 14-month bills for UAH38m (par value), while demand was for UAH139m. Interest rates ranged from 17.8% to 18.3%, and the MoF's decision was likely to accept one competitive bid with the lowest rate and all non-competitive demand. Therefore, the cut-off and weighted-average rates declined by 50bp to 17.8%.
The MoF made a similar decision for the 18-month paper. There were 17 bids for UAH122m, with rates ranging from 18.25% to 18.6%. The MoF decided to accept just nine bids for UAH88m (par value). However, the MoF accepted different competitive bids with rates from 18.25% to 18.35%, so the cut-off rate was set at 18.35% (down 50bp) and the weighted-average rate at 18.27% (down 54bp).
On Aug.1, the MoF decreased the interest rate for "reserve" notes, too. Demand for this paper, which banks allowed to use to cover part of required reserves since August 11, 2023, was UAH3.9bn in 20 bids, with interest rates ranging from 19.19% to 19.75%. Most of the demand was below 19.5%, which the MoF set as the cut-off rate, down 25bp from last week. Significant demand with low rates caused the weighted-average rate to slide by 36bp to 19.39%.
The MoF borrowed a moderate amount of funds on Aug.1, but achieved the largest decrease in rates since the beginning of June when it started to selectively reduce interest rates for UAH bills. This is the debut bond interest-rate cut after the NBU revised its key policy rate, but probably not the last before the next review of the NBU key policy rate in September.
