Another break in the high activity in the primary market was seen yesterday, and demand slightly moved to FX-denominated bills. The total amount of borrowings rose by about UAH1bn compared with last week.
After receiving low demand for the two shortest bills last week, the three and six month, the Ministry could not use limited offerings to decrease interest rates because demand was lower than supply. In yesterday's auction, offerings amounted to UAH0.5bn, or three times lower than the previous week. With this limit, Ministry was able to decrease rates for the three-month bills.
Out of 18 received bids for the three-month bills for UAH674.6m, the Ministry accepted only eight bids for the full amount offered. The Ministry rejected 10 bids, setting the cut-off and weighted-average rates at 17.89% which was 61bp lower than the cut-off rate and 48bp lower than the weighted-average rate compared with a week ago.
Cut-off rates were unchanged for other issues. The Ministry sold six-month and 12-month bills at 18.5%. The 1.5-year bills were set at 18%, and the four-year instrument came in at 16%.
There was some movement in weighted-average cost of borrowings: the six-month bills were down 3bp, 12-month paper rose 11bp, and the 1.5-year bills slid 4bp. The weighted-average rate for the four-year bills remained the same at 16%.
At the same time, demand for FX-denominated bills continued to increase. This week, US$113m of demand was fully accepted, which provided the budget with US$112.5m of proceeds. These borrowings fully cover US$74.4m of FX-denominated debt repayments scheduled for this week.
This week, demand for new bills rose slightly due to the increase in demand for FX-denominated bills. UAH-denominated bills did not receive large demand, including low demand from foreign investors. With low debt repayments in local currency next week, this level of demand is enough to refinance them fully. At the same time, if demand for FX-denominated bills next week is the same as it was yesterday, the Ministry will be able to refinance all FX-debt repayments.
