On April 9 the Ministry of Finance decreased interest rates for two out of three offered UAH bonds, coming closer to a decrease in three-month NBU CDs interest rates.
Competition in 12-month bill purchases caused a significant decline in interest rates. The lowest rate in bids declined by 10bp to 16.05%, and the highest rates fell by 19bp to 16.15%, 10bp below last week's cut-off rate. With such rates in bids and over x2 oversubscription, the MoF satisfied only 17 out of 26 bids with rates up to 16.1%. Due to the cap, most of the bids could be satisfied partially. Both the cut-off and weighted-average rates decreased to 16.1% or 15bp and 13bp lower than last week.
Demand for two-year paper was usually low, but all investors submitted bids at a 17% rate, 10bp lower than last week. Therefore, the MoF was ready to accept all bids.
For the three-year notes, demand was lower than the cap. But in contrast to the other two securities, the Ministry was constrained in its ability to cut rates. The lowest rate remains at 18.10%, while the highest rate was up 5bp to 18.35%. Expectedly, the MoF did not accept the rate increase to borrow an extra UAH100m. The Ministry kept all rates unchanged with an 18.3% cut-off rate and an 18.29% weighted-average rate.
This auction provided the state budget with UAH7.2bn proceeds, including UAH5.4bn in local currency and EUR42.9m. UAH proceeds were lower due to a smaller cap for 12-month bills and lower demand for three-year notes. However, this did not prevent the Ministry from continuing to lower rates for some instruments. Four weeks after the NBU cut its interest rates, interest rates for 12-month bills fell by 70bp, for two-year paper by 60bp and three-year notes by only 20bp.
