Changes in UAH instruments

Yesterday, the Ministry of Finance attracted only UAH3.1bn (US$105m) to the budget, a fourfold reduction compared with a week earlier. But this is not surprising because today, there will be no redemptions, so investors did not have funds to reinvest.

Of the five offered issues, just three bills were already sold at primary auctions earlier this year: two-month and 1.5-year local-currency bills, and 11-month USD-denominated paper. This did not contribute to the extra activity of investors: two-month securities were purchased for UAH351m (US$12m), 1.5-year bills for only UAH60m (US$2m), and USD-denominated bills for only US$15.8m.

But in contrast to previous auctions when new instruments were not very interesting to investors, the new issue of six-month bills maturing at the beginning of next year received the greatest demand yesterday. In total, demand amounted to UAH1.8bn (US$61m), and the budget received almost UAH1.7bn (US$57m).

In addition, yesterday was the offer of another issue of two-month bills, which were not classified as military, and under current regulations, cannot be sold on the secondary market. They were placed on the same terms as the military bills, at a rate of 9.5%, and amounted to UAH550m (US$18m) at face value. Such a decision could be a step by the MoF toward the market to meet the needs of investors who cannot invest in military bonds, but want to buy new Ukrainian securities.

So, although borrowing has declined, the general trend in the structure of instruments and the distribution of demand is improving expectations that the addition of non-military bonds may expand the investor base. In particular, foreigners who have not bought military bonds in the past few weeks may be interested in such instruments.

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Official results on issuance of domestic bonds