Total demand in this week’s primary auction was close to last week’s amount. The MoF very selectively accepted bids borrowing less than last week, and was able to attract less than UAH1.2bn.
Raising interest rates did not help either. The MoF again offered bills with maturities up to six months, so an increase was expected. Yesterday, the rate for four-month securities increased immediately by 102bp compared with the auction in May 2021. The cut-off rate for 12-month bills was increased by 30 bp, and by 20 bp for 14-month securities.
The Ministry reduced rates for the three-year note and accepted all demand. Bids were submitted at a rate of 12.3%, the same level as three weeks ago. Therefore, given that demand was unanimous, the Ministry could not set higher rate.
The maximum rates in bids for most bonds increased even more, indicating the need to adjust the yield curve after the NBU key policy rate revision last week. However, without large volumes in the bids, a sharp increase in rates is not likely.
In the end, activity in the primary market was low with isolated attempts to obtain higher rates. But without large UAH-denominated debt redemptions soon, the Ministry of Finance will continue to be cautious in revising rates.