The Ministry of Finance refused to raise interest rates on some offered bills and attracted UAH3.1bn (US$84m) to the budget yesterday.
The budget attracted the most funds from EUR-denominated bills due June of next year, almost EUR55m (UAH2.1bn), two-thirds of the funds received at yesterday's auction.
Another UAH0.9bn (US$25m) was raised through two-year bills for which the Ministry agreed to raise rates by another 25bp to 19.5%, and UAH63m (US$1.7m) through seven-month paper, for which the MoF set the rate similar to the semi-annual bills.
However, the Ministry of Finance refused to sell two ordinary (non-military) securities. While demand for one-year paper was insignificant and could not affect the total volume of borrowing, the decision regarding 1.5-year bills strikes us as ambiguous. Only one bid with a rate of 19.25% in the amount of UAH3bn (US$82m) was submitted for this instrument. Compared with the 16-month bills sold last week that had a rate of 19%, 25 bp looks like a reasonable increase for three months of additional maturity. The same is true for the two-year paper, which now has a 19.5% interest rate. The amount of funds the budget could receive would also exceed by three times yesterday's proceeds from the two-year paper.
Nonetheless, the budget continues to attract funds on the primary market. Still, the decisions of the MoF regarding the accepted bids do not always look logical, especially when the refinancing of redemptions remains low. Next week another UAH14bn (US$383m) must be repaid.
