Lowest borrowings of the year, but at constant rates

This Tuesday, only UAH513m was borrowed for the state budget, which was the lowest amount this year. Excluding FX-denominated bills, the amount raised this week was the second lowest amount raised in a primary auction, with the lowest borrowed in April.

This week, the Ministry of Finance offered instruments with maturity from 11 months to five years, but demand was almost six times lower than last week. Without redemptions, local investors are in no hurry to invest in new paper. Foreigners are likely to have ignored the auction again, selling bonds from their portfolio instead.

Almost all demand was unanimous at the same cut-off rates as last week. Only the 15-month and three-year paper differed. For the 15-month, all demand was at the level of the weighted average rate of the last week’s auction, so the cut-off rate slid by 3bp to 11.57%. And for the three-year note, the Ministry of Finance rejected one bid in the amount of UAH0.5m, which was at the rate of 12.5%, or 1bp higher than the rest of demand.

The Ministry's attempt to fix the current level of rates a week before the next revision of the NBU key policy rate resulted in a significant drop in borrowings. The situation could be improved, however, with paper that is scheduled to be offered. Next week and at the end of the month, USD-denominated paper will be offered. For the first time in October, a six-year UAH-denominated note will be offered at the end of the month, which last month received significant demand from foreigners.

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Official results on issuance of domestic bonds