March 31 primary auction demonstrated that the hype around the decline in yields has died down, and bid rates have stabilised mostly at the cut-off level. Demand has fallen below supply, so there is currently no prospect of a further decline in yields.
Bidders for the one-year military bills submitted 22 bids, totalling less than UAH 0.9 bn, i.e., only 43% of the cap. Yields were in the range of 15ꟷ15.15%, i.e. without claims for rate increases. The cut-off remained at 15.15% for the fourth week, and the weighted average yield came very close to it at 15.14%.
The range of bid yields for the three-year note was the same, only 15bp, from 16% to 16.15%. However, the volume of bids with rates below the maximum was insignificant, so the weighted average rate was similar to the cut-off rate – 16.15%. However, total demand amounted to UAH1.8bn, which is 11% below the cap and almost 2x that of the one-year paper.
Thus, the yields of one-year bills in the primary market have decreased by 120bp YTD, or 2.4x of the NBU key rate cut, and the yields of three-year notes by 165bp, or more than 3x the NBU key rate cut. The term premium that buyers of three-year securities receive in addition to the yield of one-year bonds is 100bp, or 45bp less than at the beginning of the year.
