Yesterday, the Ministry of Finance replaced both issues of UAH-denominated bills that were offered in March, the funds from which were used to finance the armed forces and other critical expenditures, the so-called as military bonds. However, this replacement led to a reduction in demand in the primary market.
Instead of one-month and 11-month bills, two new issues of UAH-denominated paper with a maturity of seven and 15 months were offered, with the same terms as before: 10% interest rate for the shorter and 11% for the longer maturities.
Banks have already bought a large amount of military bonds and can trade only these instruments. Consequently, they do not have much in the way of free funds. The next redemption of UAH-denominated bond will take place in late April. On the other hand, small investors cannot participate in the primary auction, so demand from them immediately declined.
Nonetheless, demand yesterday amounted to UAH3.3bn (US$113m), which is a very positive result even in such conditions. Next week the interest may expand even more.