On Aug. 13 the new "reserve" notes attracted demand from banks and helped the Ministry of Finance raise two-thirds of the UAH7.2bn received for the budget.
This three-year instrument collected almost UAH8.7bn of bids with rates from 16.29% to 16.5%, but the Ministry set the cap at UAH5bn. So, demand was satisfied partially: bids with lower rates than 16.5% the MoF satisfied fully, while bids at the cut-off rate and non-competitive bids were accepted partially within the rest of the cap and pro-rata. Therefore, the cut-off rate remained unchanged at 16.5%, while the weighted average rate slid by 4bp to 16.43%.
Interest rates for two-year paper also decreased. Demand was scant, only UAH23m, including 10% of demand in competitive bids. So, small competitive bids determined the conditions for all others who submitted non-competitive bids. Since the maximum rate was 5bp lower than last week, the Ministry lowered the cut-off rate by 5bp and the weighted average rate by 7bp to 15.45% and 15.43%, respectively.
Only 13-month bills saw no changes in terms. Demand rose to UAH2.1bn, but among the participants, there was an attempt to get higher interest rates. The Ministry rejected a bid for UAH300m, leaving the cut-off rate at 14.65%, and the weighted average increased by 2bp to 14.65%.
As a result, the Ministry almost refinanced last week's redemption of "reserve" bonds, and huge demand for a new "reserve" instrument may gradually shift to next week, allowing the Ministry of Finance to increase the size of the new issue to UAH20bn, similar to what was redeemed last Wednesday. As for rates, their change is situational and is unlikely to be decisive for the general situation in the market anytime soon.
