New maturities were offered, but they did not result in increased proceeds. Yesterday, the MoF borrowed just UAH22.2bn (US$0.8bn). A few instruments saw further increases in rates.
On one hand, the MoF is trying to spread the debt burden more smoothly over the year and offered bills with new maturity dates. Out of four bills with redemptions next year, three are new issues. These instruments were well received and brought in most of the proceeds. Also, the new bills that mature next December, a month that currently does not have redemptions scheduled, attracted the largest amount of proceeds.
But on the other hand, launching new issues will make amount outstanding of each smaller, decreasing their liquidity, and, as the result, lowering demand from investors. So, the negatives are less secondary market activity and a negative impact on foreigners' demand.
Longer bonds were sold yesterday, also: 1.5-year bills and notes ranging from two to four years in maturity. Amounts were mostly low, except the four-year paper, which provided important support for the state budget. We assume that foreigners continued to purchase these notes, but not as actively.
According to our estimates, most of the new instruments were purchased by local banks. Foreigners were responsible for about 10-15% of total funds raised yesterday, or UAH2-3bn (US$80-100m).
This auction will cover current needs to fund budget expenditures. But with this new strategy, the Ministry will have to pay more attention to the new instruments offered and not slow their efforts to raise new funds next year to refinance debt repayments and borrow additional funds to cover the budget deficit.
