Yesterday, the MoF was not only able to refinance most of its debt redemptions, but it also decreased rates for all offered bills at the primary auction.
Six-month bills were more than four times oversubscribed, which resulted in a decline in the cut-off rate by 110bp and weighted-average rate by 69bp, both to 9.2%, or just 5bp above the cut-off rate for three-month paper last week.
However, for longer instruments, the rate decline was less material. For 12-month and 16-month bills, the MoF increased caps by UAH0.5bn to UAH1.5bn and UAH2bn, respectively, restraining a possible decline in rates. Demand was large for these instruments, as well, about two times greater than the offered amount. Therefore, the decline in rates was just 20bp and 30bp, respectively, for 12-month and 16-month paper.
For two-year and three-year instruments, cut-off rates slid without capped offerings by 10bp to 11.6% and 12.05% respectively. The MoF rejected just three bids for the two-year paper and accepted all demand for the three-year.
Rates for USD-denominated paper declined, too. The Ministry set a cap for this issue, but demand was lower, just UAH128m vs a cap of US$200. However, the MoF rejected three small bids and decreased both cut-off and weighted-average rates by 10bp to 3.7% compared with the previous auction in January.
As the result of this auction, the Ministry of Finance refinanced 70% of redemptions scheduled for today. It could have borrowed a significantly larger amount and refinanced all of today's debt repayments in full. However, the decision to set caps and reject a large part of demand indicates that the Ministry has enough funds in budget accounts to meet debt repayments and is not interested in short-term borrowings.