Yesterday, the Ministry of Finance raised UAH9.6bn (US$261m) for the budget, mostly in local currency, rejecting part of the demand for all offered hryvnia bonds.
The shortest paper was oversubscribed for the first time in four weeks. With a cap of UAH500m (US$13.6m), demand amounted to UAH641m (US$17.5m), mainly in non-competitive bids. Competitive demand was unanimous at a rate of 15%, so most likely, all competitive bids were satisfied, and non-competitive demand was satisfied within the rest of the cap.
Twelve-month bills did not receive much demand, just UAH151m (US$4.1m), but the bid for UAH100m (US$3.7m) required a rate increase to 25%, so it was rejected.
"Reserve" bonds usually receive significantly greater demand than the cap, more than five times. Therefore, the MoF sold 30% of the offering under non-competitive bids, and 70% of the cap to those who submitted the lowest interest rates in their competitive bids. As a result, the cut-off rate for this paper was set at 18.6%, and the weighted average rate at 18.51%, which is 65bp and 56bp lower than last week.
While the increase in demand for seven-month OVDPs was mainly unexpected, the demand for "reserve" paper and another reduction in rates were expected. Currently, according to the auction schedule, the MoF will offer new "reserve" paper in two weeks, so banks rushed to buy bonds to cover part of the required reserves now. Therefore, competition for the opportunity to purchase them immediately, and not in two weeks, was high.
