Yesterday, the Ministry of Finance raised UAH12.7bn (US$470m) for the budget, mainly in local currency. Interest rates were raised minimally, and the MoF accepted all the demand, which was surprisingly unanimous. But almost 80% of the borrowings came through semi-annual bills.
Almost UAH8.7bn (US$306m) was borrowed through semi-annual UAH-denominated securities, on which rates were increased by 15 bp. to 10.7%, and another UAH1.7bn (EUR 56.5mn) in euros. The bills in euros were sold at a 2.35% interest rate, which is 15bp lower than bills in euros were sold earlier this year, but with a reduction in the maturity by almost twice.
Bills maturing in 2023 also saw good demand. Both issues, those maturing in January and November, provided the budget with more than a UAH1bn (about US$40m) each, and both saw an increase in rates by 8bp, up to 11.65% and 12.55% respectively. In fact, 14-month securities have now the same rate as 12-month bills, for which the cut-off rate rose last week. Two-year paper is a little closer to the three-year securities, and now give investors in the primary market an additional premium of 90bp for a longer maturity compared with 14-month bills.
For longer maturities, three-year and six-year notes, rates have not changed. The longest paper offered yesterday gave the lowest amount of funds, which may indicate minimal interest in new investments in the primary market by foreigners.
However, the Ministry was able to almost completely refinance the debt redemptions in local currency planned for today, but they will have to add several hundred million hryvnias to pay off the principal amount of debt and another billion hryvnias to pay the interest. This is a very good result, but the fact that borrowings are mainly for the short term increases the need for borrowing next year, although it allows to improve budget financing in the absence of active inflows from foreigners and to raise interest rates only gradually.