Yesterday, the Ministry of Finance rejected most of the demand for UAH-denominated bills, keeping interest rates unchanged. Budget proceeds amounted to just UAH894m, including most funds in US dollars of US$29.8m (UAH816m).
There were four bids for local-currency paper. Just one competitive bid was at 7%, the same as two weeks before. Two other competitive bids had higher rates. The MoF rejected these two bids, and most of UAH1.2bn of demand, selling UAH80.2m of bills, including UAH11.2m to a non-competitive bidder.
However, for USD-denominated paper, the Ministry rejected just two bids out of the 24 bids received, or US$0.9m out of US$30.3m of demand. A bit more than a half of accepted demand was non-competitive. The Ministry kept the cut-off rate at the same level, 3.5%, as was seen for the same tenor in February; however, the weighted-average rate was up 11bp to 3.5%.
The Ministry borrowed a small amount of funds this week. Demand was low, as this week banks have to support month-end tax payments, nor were there any principal repayments to reinvest in new bills. We anticipate an increase in primary market activity later in September when the MoF will need to replenish FX accounts after large debt repayments and investors will receive redemptions in hryvnia, part of which can be reinvested in new paper.