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With yesterday's auction, the Ministry of Finance completed the refinancing of FX-denominated bonds redeemed in April and refused to raise the yields on UAH instruments.
The key event yesterday was the offering of USD-denominated bills. The MoF offered another US$100m in bonds, in addition to the US$100m placed last week. Demand decreased slightly from a 2.1 bid-to-cover to 1.5, but it still left the Ministry of Finance with room for manoeuvre. The offer was exhausted when the bid rate reached 3.15% (9 bp below last week). Taking into account the minimum rate of 2.8%, the weighted average rate was set at 3.05%, or down 8bp WoW.
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 43.95/USD, 51.44/EUR; [3] yields on coupon-bearing bonds are effective yields to maturity. Sources: Ministry of Finance of Ukraine, Bloomberg, ICU.
At the same time, UAH bonds saw almost no change in interest rates. The Ministry of Finance rejected bids with rates above the cut-off rates of previous auctions for both UAH instruments. However, the weighted average rates changed slightly: for 15-month bills, the weighted average rate increased by 2bp to 15.14%, and for the two-year instrument, it slid by 1bp to 15.85%.
To do this, the Ministry of Finance rejected 8% of the demand for 15-month securities and almost 30% of the demand for two-year paper, because some bidders sought to raise rates by 25-33bp. However, for the ministry, the volume of demand at such rates was not at all important that it would make such concessions.
Appendix: Yields-to-maturity, repayments
