On 27 May 2019, Clearstream, the international central securities depository (ICSD) of Deutsche Börse Group, will connect the Ukrainian market to its network and make Ukrainian government securities eligible in its system. Citi will act as cash correspondent bank and local operator of Clearstream’s account at the National Bank of Ukraine (NBU).
This step will enable settlement of all government bonds denominated in the local currency hryvnia through the international system of Clearstream, improving efficiency at international standards while reducing costs for investors.
This joint initiative should encourage an increase in demand for Ukrainian government bonds, boosting liquidity and their attractiveness in the international market. As a result, the Ukrainian government will benefit from a wider range of sources of long-term funding and a lower cost of borrowing. Moreover, the offering will improve the currency structure of public debt and transmission mechanism of the NBU monetary policy, while contributing to the further development of the Ukrainian capital markets.
Jan Willems, Head of Global Markets at Clearstream, commented: “We are looking forward to connecting the Ukrainian markets with our international customers. Being able to enter emerging markets via a stable post-trade environment is very attractive to investors all over the world. Ukraine as part of our global network creates various new investment and financing opportunities for the market.”
Yuriy Butsa, Ukraine Government Commissioner for Public Debt Management, commented: “We are happy that finally the last major bottleneck for the global local currency bond investors has been removed. This year we are witnessing a significant increase in the international investors’ participation in the local-currency bonds market. Foreign investors' holdings in Ukrainian domestic government bonds exceeded USD 1.5 bn and continue to grow. With the Clearstream link opening, there is a great potential for the increase of the share of non-residents holdings of domestic government bonds as it is still around 5 per cent of total local currency debt as of today, which is much smaller compared to other emerging market countries.”
Oleg Churiy, Deputy Governor of the NBU, commented: “The NBU launched the project on establishing correspondent relationships with Clearstream three years ago and now it has been officially implemented. Creating easy access for foreign investors to Ukrainian government securities will foster long-term investments in hryvnia instruments, reduce the state’s need for financing in foreign currency and respectively currency risks. We will continue to make domestic government bonds more attractive and its secondary market more liquid. In that respect, one of the next steps should be expansion of trading these instruments at the international trading platforms.”