On the eve of the revision of the NBU key rate, the Ministry of Finance managed to increase borrowings, but reduced the number of instruments and offered FX-denominated paper. In hryvnia terms, borrowings doubled compared with the previous week, while in hard currency, borrowings more than halved compared with their offering in September.
Bills maturing in 10 months received fairly good demand, more than one billion hryvnia, which was more than a three-time increase over last week. Demand remained unanimous — all competitive bids were submitted at a rate of 11.5% — so all of them and all non-competitive bids were accepted in full.
But there was no unanimity on the two-year paper. Out of the 13 bids received, three competitive bids were submitted with rates higher than the cut-off rate a week ago. Therefore, out of almost UAH353mn of demand, only UAH103mn were sold in 10 competitive and non-competitive bids at a rate of 12.4%.
The view on rates for USD-denominated bills has not changed. Two-year securities once again received unanimous demand at 3.9%, and it was completely satisfied. In contrast to UAH-denominated bills, demand for FX-denominated paper was mainly in non-competitive bids, as investors do not expect these rates to be revised and, in the event of changes, do not want to be left without bonds.
Therefore, borrowings in general rose four times, and in hryvnia it more than doubled. Of course, this is a very small amount for the budget, but the result was expected. A few factors impacted the results. Tomorrow, the NBU will announce its decision on the key policy rate. Redemption of USD-denominated bonds is happening today and we will have to wait until next week to talk about reinvestment of these funds. Redemption of UAH-denominated bonds is scheduled for next week causing increase in demand for local currency bonds next Tuesday. Therefore, in general, borrowings may increase quite sharply next week, as they did in late September.
