Domestic borrowings increase

On Nov. 1, the Ministry of Finance raised more than UAH13bn (US$365m), including almost UAH12bn (US$326m) through UAH-denominated instruments, mainly through bills with increased interest rates.

The MoF continued to gradually hike rates, and yesterday it was for five-month bills, which were up by 150bp to 13.5%. This paper received the greatest demand and was responsible for almost 90% of yesterday’s budget proceeds. Demand amounted to UAH12.6bn (US$344m) in 11 fully satisfied bids.

However, the 11-month paper was already less interesting, with an interest rate of 14% or only 50bp higher than the five-month bills. Demand was only UAH7.5m (US$0.2m), and almost all bids were non-competitive. That is, the participants of this placement hoped that that their bid with a higher rate level would be accepted, and they could get a better yield, but they did not want to take the risk of submitting competitive bids.

The three issues of ordinary (non-military) bills received very little demand yesterday, with only seven bids and just UAH4.8m (US$0.13m) raised for all of them. They were sold at a rate of 18.5% despite the considerable discrepancy in maturities.

There was not much interest in FX-denominated bills, which were purchased in 13 bids for almost US$39m, with the unchanged interest rate at 4.25%.

So, in general, borrowings have improved significantly, thanks to UAH-denominated bills, although interest rate increases are currently taking slow steps and selectively. However, such an amount remains insufficient to refinance current redemptions, which will be made today for UAH18bn (US$494m).

RESEARCH TEAM: Taras Kotovych

See full report here.


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