In general, market conditions are not favourable for new borrowings. Yesterday, the MoF was only able to borrow UAH1.6bn, which was not enough to refinance today's debt repayments, although it did compensate some of the hard currency that was used last week for repayments.
The largest part of the proceeds, US$49mn, came from USD-denominated bills, which compensated part of the hard currency spent for repayments in April.
The Ministry accepted all demand for local-currency instruments, although it was only able to borrow UAH216m.
Despite the low amount, demand for the six-month paper was quite active. Bidders requested rates in the range from 8% to 8.5%, which resulted in a cut-off rate decline of 18bp and the weighted-average rate down 52bp.
Low demand can be attributed to investors waiting for the NBU key policy rate increase tomorrow, which can cause a slight increase in rates for short-term bills. Another contributing factor is foreigners' partial withdrawal of funds from UAH-denominated debt, as they can sell bonds to locals at better conditions than the MoF's primary auction.
However these factors are short-lived. Therefore, given quite low repayments in April, the government will use accumulated funds in the Treasury account to make debt repayments. In that case, we remain optimistic that market sentiment will improve and the Ministry will be able to refinance all redemptions paid in April.