Yesterday's auction saw abysmally low demand for UAH-denominated bills, although this did not prevent the MoF from further cutting interest rates by rejecting some bids.
Total demand was UAH86.8m, the lowest amount seen this year for local-currency bills. But in terms of actual borrowings, the lowest amount was at the beginning of this year, when MoF borrowed in hryvnia just UAH41.9m. Yesterday's proceeds were UAH77.2m.
For three-month and two-year bills, the MoF rejected only one bid for each, decreasing rates for these maturities. For three-month paper, rates were down 25bp, to 15.75%. The decline in the two-year instrument was less significant at just 11bp for cut-off and 14bp for weighted-average rates, to 15.39% and 15.36%, respectively.
The rate was unchanged only for one-year bills, for which the MoF received only one non-competitive bid. The Ministry accepted this bid at the same level as last week.
In sharp contrast to last week's auction, demand was insufficient, and, therefore, had low impact on budget financing. This could be because of the amount of investment last week. In addition, the hryvnia has weakened, which adds uncertainty and risk to holding local-currency bills, making investors cautious.