The Ministry of Finance sold all three bond issues offered yesterday, increasing borrowings to UAH2bn (US$72m) from UAH330m (US$12m) a week before. However, to accomplish this, the Ministry had to slightly increase interest rates.
Largest demand was seen for the seven-month bills at UAH2.1bn (US$74m). However one bid for UAH100m (US$3m) was rejected due to the high interest rate, although this did not prevent an increase in interest rates. The above-mentioned demand for seven-month paper was combined from three bids, where one bid was non-competitive plus two competitive bids with 8% and 9.95% interest rates. Due to large amount in the bid for 8%, the MoF decided to accept it and the non-competitive bid, increasing the cut-off and weighted-average rates for this tenor by 18bp to 8%.
Longer maturities saw substantially lower monetary demand, despite a larger number of bids.
For 12-month paper, demand was UAH628m (US$22m), but most of it came with high rates, above the level set a week ago. The Ministry accepted three out of six bids, but rejected most of demand. UAH23.7m (US$0.9m) of bills was sold at par value. Therefore, rates were set at the same level as last week, 9.5%, keeping the cut-off rate unchanged with a slight increase in the weighted-average rate by 4bp to 9.5%.
Similar was the placement of two-year bills. Out of UAH114m (US$4m) of demand in 11 bids, the Ministry accepted nine at UAH79m (US$3m) par value, also keeping the cut-off rate unchanged with a slight increase by 7bp in the weighted-average rate to the same level of 10.5%.
The Ministry refinanced about one-fifth of today's local-currency debt repayments. Given the rather high balances in budget accounts, this did not cause difficulties in securing payment. But the general trend continues, and it is not positive. Demand for hryvnia-denominated bonds is quite low due to the slight weakening of the hryvnia, and not all investors are ready to invest again in new bonds in the primary market.
Therefore, it is to be expected that part of the funds will be directed to the secondary market. In next week's primary market, demand may be about the same, although with bidders looking for higher rates.
