Yields on Ukraine's OVDP discount treasury bills are set to rise this week after the government said it may convert t-bills, dealers said on Thursday.
'Yields are already around 100 percent on the secondary market and I think they will rise,' said Vyacheslav Veremeychenko at Aval bank in Kiev. 'Yields will peak on Friday,' he said.
Dealers said the finance ministry's announcement on Tuesday that it may convert T-bills had somewhat panicked the market.
The finance ministry gave no details of what form the conversion might take.
Dealers predicted low demand at the auctions due to the higher yields on the secondary market and uncertainty over the possible conversion.
Finance Minister Ihor Mityukov said on Tuesday it would be an 'absolutely voluntary conversion on honourable and profitable terms for all sides'.
Mityukov said the conversion would be done only after full consultation with foreign investors and domestic banks, who hold about Hr 2 billion and Hr 2.5 billion respectively of Ukraine's OVDP discount treasury bills.
The conversion idea was prompted by Russia's de facto rouble devaluation on Monday and the ensuing turbulence in Moscow's markets, which have a great influence in neighbouring Ukraine.
'Everybody wants to sell but people are not ready to buy,' said Veremeychenko.
'Many foreign clients want to sell at any price, even with losses, just to take money out of the market.'
The share of non-residents in Ukraine's t-bill market has fallen to 28 percent from 50 percent at the start of the year.
The finance ministry last auctioned Treasury bills on Tuesday.
Yields on 266-day T-bills edged down to 59.51 percent from 59.96 percent at the previous auction.
Yields on 301-day paper also fell to 59.73 percent at auctions on Tuesday from 60.19 percent previously.
Yields on 364-day paper slipped to 59.96 percent from 60.29 percent at previous auctions of 12-month paper. Yields on 510-day paper averaged 57.04 percent. Auctions were scheduled for Thursday.
