Investor’s focus on short-term loans

The first auction in December provided the budget with proceeds of UAH16.6bn. The number of bills maturing next year increased, and the share of new borrowings with redemption next year rose to almost 94%.

Yesterday, the Ministry of Finance expanded the range of instruments offering nine-month UAH-denominated bills for the first time this year, and reducing the tenor of FX-denominated bills. However, they did not offer three-month local-currency bills. Instead, three-month euro securities and six-month USD paper were offered. The shortest term of borrowings in hryvnia was also six months.

It was nine-month bills that brought the budget the largest amount of funds in local currency yesterday. But the record holder of this auction was US$-denominated bills, which provided the budget with the equivalent of UAH7.1bn.

These borrowings came with an Increase in interest rates. The nine-month paper was placed for the first time since June of last year, and the rate was set closer to 12-month securities at 11.5%. This represented a premium of 80bp to the semi-annual bills for an additional two months of tenor.

Rates on 12-month, 17-month, and even two-year local-currency instruments rose by 5bp, 15bp, and 10bp, respectively.

On the other hand, rates fell for FX-denominated securities with reduced tenors. Bills in euros fell by 60bp to 1.75%, with half the length of time to maturity. Bills in US$ fell by 20 bp to 3.5% for six months, also half the time to maturity compared with bills sold in October.

The Ministry of Finance was able to attract more funds, but, traditionally, for the end of the year, maturities are reduced and rates increased. Under such conditions, there is a chance to significantly improve budget funding, shifting the need for funds to the first half of next year.

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Official results on issuance of domestic bonds