Yesterday, the MoF offered only FX-denominated bills. This week, the Ministry was able to borrow nearly US$0.9bn, which improved the balance in its FX accounts and budget financing. Three-month USD-denominated and 13-month EUR-denominated bills were offered, and provided US$801m and EUR75m of budget proceeds, respectively.
This was the fourth offering of FX-denominated bills this year, and the third time in March, as due to instability in global financial markets caused by spreading of COVID-19, demand for UAH-denominated bills fell to a very low level with a significant increase in likely cost for the budget.
Yesterday, three-month USD-denominated paper was offered, which was last offered a year ago. Despite current conditions, this paper collected US$812m of demand, most of it accepted. The MoF rejected just two bids amounting to US$5m. In total, the budget will receive US$801m of proceeds, which were received at 3% cut-off and weighted-average rates, lower than for the 10-month bills a week ago.
Last March, three-month USD-denominated bills were sold at 6.5%.
Demand for 13-month bills in euros was significantly lower. Just two bids amounting to EUR75m were submitted at a 2.22% rate, and both were accepted. Compared with the auction two weeks ago, the maturity of bills increased, while cut-off rate slid 3bp and weighted-average rate remined steady.
The amount of funds collected yesterday provided good support for the government to meet its debt repayments. To the extent that hard currency from government accounts were not exchanged in hryvnia in February and March, the current balance is enough to cover all FX debt repayments probably until the end of May. Only about US$200m of additional funds are required in hard currency for this period of time.
As yesterday's borrowing mostly are short-term, there remains a need to borrow in FX, not only to support and replenish FX accounts, but also to finance the budget deficit, as potential demand for local-currency paper is not attractive to the government due to high interest rates.
