Yesterday, the Ministry of Finance continued to move toward the market, raising the rate on another issue of military bills.
After last week's cautious offer of non-military paper and a new issue of military securities, the Ministry of Finance revised the conditions for 1.5-year paper yesterday. For this instrument, the interest rate was raised to 18.5%, the same rate at which non-military government bonds were sold last week.
But for the usual six-month military bills, it seems that the Ministry of Finance was not ready to raise the rate to 14%, the level of the additional issue last week, which one buyer purchased for the full UAH4bn (US$102m).
Therefore, semi-annual and 12-month bills were placed at 12% and 14%, for small amounts. The increase in the rate for the 1.5-year instrument immediately generated greater demand, which amounted to UAH1bn (US$27m), two times more than this paper was sold during recent weeks.
FX-denominated bills yesterday were non-military, but there was not a huge demand for them after the considerable volume of last week's purchases.
In general, the steps taken by the Ministry of Finance to raise interest rates are beginning to yield positive results. The volume of market borrowings to cover the budget deficit has increased and may increase further if rates for other UAH-denominated securities are raised.
