Budget receives new funds

Since there are no debt redemptions today, all funds from yesterday's auction are new investments in local-currency bills. Demand, and, therefore, proceeds were low. However, there were bids for all offered maturities, and the MoF had some maneuver room in setting rates.

Two-month bills were the shortest maturity offered, and the Ministry was able to slightly decrease interest rates. Demand was lower than the offered amount; however, the MoF decided not to increase rates and accepted two-thirds of demand with rates not higher than 9.4%. The level was the same for both the lowest and weighted-average rate, which indicates that probably only one competitive bid was accepted and the other four bids were non-competitive.

Rates were increased for the 1.5-year bills and came in very close to two-year paper. The cut-off rate was up 35bp to10%, the same as for the two-year maturity. The weighted-average rate rose 27bp to 9.9%, or just 10bp below the same rate for two-year paper. Demand for 1.5-year bills exceeded the offered amount, but the Ministry sold a bit less, and rejected UAH60m of demand.

Most bidders for the two-year instrument were looking for higher rates than two weeks ago, but this demand was just 16% from total amount of bids for this maturity, and it was rejected. The Ministry sold just 60% of the offering, keeping interest rates unchanged at 10%.

The seven-year note offering did not have a cap, but demand was low. The MoF was resolved in keeping interest rates unchanged, and rejected 40% of demand, keeping the cut-off rate unchanged at 9.95%. But the weighted-average rate was up 16bp to 9.95%, the same level as the cut-off rate.

Taking into the account the unstable global situation due to CoVID-19, borrowings of UAH1.6bn of new funds for the budget was a quite positive result. However, the amount of funds raised was small, especially compared with last year's active foreign investment in local-currency debt.

Next week, we anticipate the auction will be more active, as at the beginning of March about UAH4.2bn will be due in principal repayments. So, as the next review of the key policy rate by the NBU is coming soon, a large part of redemptions will be reinvested in new instruments to be offered next week.

 

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Official results on issuance of domestic bonds