After low activity in the primary auction last week, yesterday's demand and borrowings rose for both local and hard currency. Interest rates remained unchanged.
It looks like the break in banks activity is close to the end, as demand was up for six-month bills, too. Two weeks ago, demand was almost six times lower, while last week the MoF cancelled offering of three-month paper. With demand of UAH600m (US$22m) when the Ministry set a cap at UAH500m (US$18m) can indicate that banks returned to the market after about two weeks break prior the NBU monetary meeting.
The largest demand received was for the two-year instrument, which amounted to UAH3.3bn (US$53m), more than double from last week. However, as foreign investors are more interested in longer maturities than local banks, decline in demand for three and five-year notes indicates that demand from foreigners was lower.
Compared with last week, demand was up for FX-denominated bills, although it was lower than earlier this month. The rise in demand can be attributable to hryvnia weakening last week.
There were not any material changes in interest rates. Only for six-month bills, the weighted-average rate was up 1bp to 9%. For some maturities there were also bids with minimum rates lower than previously, but by small amounts, which did not have an impact on weighted-average rates.
There are not any debt redemptions today, so yesterday's borrowings are new money for the budget, or funds reinvested in new bonds from last week's redemption. Regardless, this is good support for the budget prior to next week's redemption and those at the beginning of July.
