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Yesterday, after a three-month break, the Ministry of Finance issued new two-year paper. So, the offer at the primary auctions now consists of one-year, two-year, and three-year UAH bonds.
The Ministry continued to offer 13-month military bills, for which the cut-off rate yesterday slid by 4bp and the weighted average yield declined by 2bp to 15.15% and 15.11%, respectively. The minimum bid rate also declined yesterday by 10bp to 15% - the level of the NBU key policy rate.
The new two-year instrument attracted 22 bids for UAH6.1bn or 3.1 bid-to-cover ratio. The yields in the bids were fairly wide, ranging from 15.5% to 16.14%. The MoF accepted 18 bids and sold the planned UAH2bn of bonds, including UAH0.6bn under non-competitive bids (satisfied at the weighted-average rate).
Note: [1] payment frequency abbreviations: M - monthly, Qtly - quarterly, SA - semi-annually, @Mty - at maturity date; [2] proceeds and volumes for the USD-denominated bonds are calculated based on the previous day's exchange rate 43.91/USD, 50.95/EUR; [3] yields on coupon-bearing bonds are effective yields to maturity. Sources: Ministry of Finance of Ukraine, Bloomberg, ICU.
The MoF set the cut-off rate at 15.87%, which is 72 bp above the 13-month instrument's cut-off rate. At the same time, the weighted average rate is set at 15.78%, 67 bps above the weighted average rate for one-year government bonds.
Thus, the first additional year of maturity costs the MoF 67bp above the yield on one-year securities. Still, the second additional year costs only 36bp – this is the difference between the weighted average yield of the three-year note at last week's auction and the weighted average rate of new two-year paper.
Appendix: Yields-to-maturity, repayments
