Total demand for domestic bonds rose by a third, although not due to offering FX-denominated bills. Demand rose sizably for UAH-denominated bonds. Out of UAH19bn (US$704m) of yesterday's total proceeds, UAH14bn (US$522m) was from UAH-denominated instruments.
The most interesting offering was the new five-year paper. It is likely a replacement for notes due 2025, which are in the watch list for the JPMorgan GBI-EM index. This paper received more than UAH4bn (US$150m) of demand, while MoF set the cap at UAH2bn (US$74m). Thanks to oversubscription, the MoF set a coupon rate at 12.52% and was able to sell the entire offered amount. Demand for this paper came in with rates ranging between 12.47% and 12.69%, but the cut-off rate was set at 12.59% where the offered amount was filled.
The largest amount of proceeds was provided by the 14-month and two-year bills, UAH3.4bn (US$125m) and UAH4.4bn (US$162m), respectively. These bills and the half-year paper saw just a 1bp change in weighted-average rates with unchanged cut-off rates. However, unlike the longer bills, the half-year paper saw the lowest demand yesterday, just UAH111m (US$4m) in six bids.
Demand for local-currency debt increased and with such activity, the MoF will be able to increase budget financing and improve covering the budget deficit with UAH-denominated borrowings. Such large demand for the five-year note increased its chances to be included in the GBI-EM index, but the MoF will have to offer it more often without caps to sell the amount needed to meet the index requirements.
