Despite no debt repayments this week, the Ministry of Finance raised UAH4.4bn in new funds yesterday, but had to raise interest rates even with relatively low demand.
If earlier the MoF tried to refrain from raising the cost of borrowing when demand was less than UAH1-2bn, yesterday, cut-off rates were increased even to raise only several hundred million. The only bond issue for which demand was completely rejected was the five-year securities, which received eight bids worth only UAH13m and at a rate of 13%.
The highest rate increase was for the shortest, the three-month bills, maturing in February 2022. The MoF hiked the rate immediately by 50bp with demand of just UAH153mn (par value). But for 14-month and two-year bills, rates did not change, although this week there were no bids requested a higher rate.
Yesterday's decisions of the Ministry of Finance may reflect the increased need for funds for the budget, and the need to increase borrowing compared with previous months. But raising rates for small volumes may encourage even more aggressive bidding by investors, although they may not win the consent of the issuer. On the other hand, the weakening of the hryvnia and higher rates may again attract the attention of foreign investors; however, the security situation in and around the country will play the biggest role in retaining their interest.