The structure of this week's auction was entirely different from last week. This week, the total amount of borrowings declined to UAH6.6bn, but most of proceeds were in hryvnia. In addition, the MoF decreased rates for some offered bonds.
The MoF offered two short bills in limited amounts, which allowed it to decrease rates for the six-month bills by 11bp, accepting less than a half of demand. The MoF also decreased rates for 11-month bills, but only by 5bp, rejecting a small portion of demand. In total, short-term bills provided only 26% of total proceeds in local currency.
The most interesting was debut offering for 6-year notes maturing in February 2025, which attracted the main portion of demand. Despite just 11 bids, demand amounted to UAH3.5bn. Earlier, the longest maturity the MoF sold was four years, and yesterday bidders had to submit bids with different rates, as they did not know which level would be acceptable to the Ministry. Rates were in the range of 15.7-16.0%, and the cut-off rate was set at 15.85%. The Ministry accepted most of the demand, receiving proceeds of UAH3.4bn.
Since the MoF started the road-show to tap the EUR debt market, it was not interested in borrowing FX funds from domestic market. This looks like to be the reason for offering only two FX-denominated bills, which were not attractive to investors.
However, the Ministry is moving forward to increase maturities for local-currency notes. Demand from foreign investors supported this move. A large amount of FX was purchased by NBU on Monday and Tuesday, about US$110m, and likely a large portion of the new bills was purchased by foreign investors. We expect this pattern to continue of collecting funds from foreigners that support the Ministry in refinancing short-term debt with longer maturities.