Extended offering results in larger proceeds

The Ministry of Finance expanded the set of instruments they offered yesterday, and borrowed UAH20.5bn for the budget, including UAH12bn from UAH-denominated securities. Again, interest rates were up on most issues.

The most interesting offers were two instruments with a very similar maturity, both very close to other instruments. In previous weeks, the Ministry usually offered paper maturing in November 2023 and October 2024, but yesterday, the offering also included bills with maturities in May and July 2024. Of course, the difference in tenor was slight, and interest rates for them were very similar.

For the paper maturing in May 2024, the Ministry set the same interest rate as for the two-year paper, where the cut-off rate was up by 20bp to 12.85%. And for securities maturing in July 2024, the Ministry set the rate at 12.9%, 5bp higher, the same level as the rate on three-year paper maturing in October 2024. In fact, the Ministry of Finance borrowed money for the entire period of two to three years at mostly the same price.

But most funds — almost UAH4bn — came from five-month bills, which have already been added at the last call to the auction, another step in expanding the auction yesterday.

Demand for USD-denominated bills also increased to US$307mn. As the Ministry paid almost US$600m in hard currency redemptions last week, it refinanced more than half of these repayments yesterday.

Thus, this auction became the most active in terms of budget proceeds, breaking the record set in June, when a little more than UAH19bn was borrowed. Although unlike in June when it was mostly bonds with a maturity of more than one year and up to five years were sold and a large part was purchased by foreigners, yesterday, most of the purchases were bills with a maturity of up to one year and participation from foreigners was low.

Next week, a week prior to the New Year holiday, activity may decrease again. Yesterday, interest may have included postponed demand from the previous auction, and before the New Year, foreigners’ participation may be low. Therefore, the volume of demand from the market may be even smaller.

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Official results on issuance of domestic bonds