There was less demand in the primary market this week, which prompted the Ministry of Finance to slightly increase the interest rates for local-currency bills. Proceeds raised fell to UAH2.5bn (US$92m), including UAH0.8bn (US$61.1) in local and US$30.9bn in hard currency.
As usual, six-month paper was bought by one bank. The MoF slightly increased both the cut-off and weighted-average rates by 8bp to 7.82%. Another bid came in at 10% with UAH100m (US$3.7m) of demand, therefore, as expected, this demand was not accepted.
The Ministry also increased the cut-off rate for the two-year instrument by 5bp to 10.25%. There were 12 bids, where just UAH106m (US$3.9m) of demand was rejected due to rates in bids as high as 13%. However, a large portion of accepted demand had lower rates, at 10%, which caused the weighted-average rate decline by 6bp to 10.14%.
Rates were unchanged only for USD-denominated bills and proceeds declined. The Ministry accepted 23 out of 26 bids, rejecting just US$1.4m of demand. Nearly half of demand was non-competitive as investors wanted to be sure their bids would be accepted despite what the weighted average rate would be.
This decline in demand was expected. There is usually low banking-sector liquidity in December so banks are not in hurry to buy bills with longer maturities. Compared with the three-month bills sold last week, banks' demand was restrained. They preferred the secondary market, where they can buy shorter bills than offered in the primary market or longer instruments at better yields.