Although there were no debt redemptions this week, the Ministry of Finance attracted quite good demand, which amounted to UAH3.3bn (US$115m) at par value, and they accepted UAH2.8bn (US$97m). Interest rates were up for most of offered instruments.
Three-month bills were an exception. The MoF kept the cut-off rate at the same level as the four-month bills a week ago. But the shorter tenor by a month caused a decline of 11bp in the weighted-average rate to 9.89%. The decision to satisfy demand with rates up to 10% resulted in accepting 18 out of 19 bids and rejecting just one bid at 11% amounted to UAH1m.
Other paper offered ended up with higher interest rates despite demand not being unanimous meaning the MoF had a choice.
Similar to the three-month tenor, the MoF rejected just one bid for 11-month bills. However, it was with UAH200m (US$7m) of demand or almost one-third of demand for this paper. Generally, rates in bids ranged between 10.8-11.2% or with maximum 40bp of possible rate increase from last week's level. Even though the amount in the most expensive bid was large, it was rejected. The cut-off rate was up 20bp to 11%, while weighted-average rate rose 18bp to 10.93%.
The largest increase in rates yesterday was for the three-year note. Two weeks ago, this paper was sold at 11.1%, but yesterday demand was expensive. Rates started at 11.5% and were up to 12%, therefore, a large part of demand was rejected. The MoF accepted eight out of 13 bids, selling just UAH173m (US$6m) out of UAH473m (US$17m) of demand (par value).
Generally, rates for UAH-denominated bonds are continuing to rise, which is gradually increasing the attractiveness of local-currency debt for new investments. But without repayments, demand is low. Investors are also looking for higher rates for new purchases. Therefore, when the MoF has large needs for new borrowings to finance the budget, rates will continue to increase.
