Yesterday, the Ministry of Finance kept the amount of UAH-denominated borrowings at the previous level, attracting UAH6.6bn and another EUR167mn in hard currency. But to attract such a large amount of borrowings, the Ministry had to increase interest rates.
The increase in interest rates was only for two bond issues, those maturing in one year and in six years. These two instruments received 66% of demand for UAH-denominated bonds, and taking into account the decisions made on rates, they provided 73% of borrowed funds. In addition, many bids were submitted with higher levels of interest rates, but the MoF rejected them.
All bids were accepted for three-month UAH-denominated bills and for securities denominated in euro, as these two instruments saw unanimous demand.
Most demand and bids were rejected for the two-year bills, where the highest rate was 23bp above the cut-off rate, and slightly less for three-year note, where the highest rate exceeded the cut-off rate by 20bp. But the rest of the securities received only one bid with a higher rate and in small amounts.
In general, this auction went well; however, investors were looking for higher rates. The Ministry has demonstrated that it can agree to higher rates, but subject to demand of at least two billion hryvnia, and subject to the predominant unanimity of demand. So now, the rate increase remains situational and very restrained.
