On Feb. 20, the Ministry of Finance increased borrowings to UAH16.6bn (US$434m). Two-third of the funds came from EUR-denominated bills.
On Feb. 22, the MoF has to redeem EUR304m (at face value) of bonds, so on Feb. 20, the key focus was on whether the Ministry could refinance at least the majority of this repayment. Total demand was slightly lower, EUR275.3m, including a bid for EUR0.5m at a 4% interest rate. Most of the demand was at 3.25%, similar to the auction in January, so the MoF satisfied all bids except one expensive outlier and refinanced almost all of Feb. 22 redemption.
At the same time, demand for UAH bonds remains restrained. In general, hryvnia instruments brought UAH5.1bn to the budget, almost similar to previous auctions. But this was less than half of what the Ministry of Finance planned to borrow.
The MoF sold less than one-third of the cap for the 13-month military bills and about a quarter of the cap for the three-year instrument. At the same time, they sold three-fourths of the cap for two-year securities. Interest rates in bids were unchanged compared with the previous week, so the cut-off and weighted average rates remained unchanged for all UAH instruments for the fifth week: 16.8% for one-year, 17.5% for two-year, and 18.5% for three-year bonds.
The overall result of the auction was quite good and even exceeded expectations because the previous placements of EUR-denominated bills were less active and gathered much less demand. Total borrowing for February has already exceeded UAH30bn (US$0.8bn), so by the end of the month, the amount of borrowings may exceed the amount of funds received in January, with a possible increase in the share of funds from FX-denominated bills above 50%.
