Yield curve of UAH-denominated domestic government bonds placed in last two auctions
At the auction held on Tuesday, June 28, the MoF raised only Hr 2.1bn for the state budget, of which only Hr 350m ($12m) was in hryvnia. FX-denominated bonds became a key source of funding once again.
Through this instrument, $60m, or almost Hr1.8bn, was raised: $47m through semi-annual securities at a rate of 3.5% and $13m through 12-month bills at a rate of 3.7%.
However, as was the case last week, UAH-denominated bills were not in demand. The auction received 52 bids, but for only Hr 356m ($12m) at face value.
The vast majority of demand, Hr 312m ($10.5m) in 23 bids, was submitted for two-month paper, while semi-annual and 12-month bills received Hr 32m ($1m) and Hr 12m ($0.4m) of demand, respectively.
Rates on all military bonds in local currency remain unchanged at 9.5‒11.5%, causing further decline in demand for UAH-denominated instruments. The demand for them on June 28 was the lowest of all placements since the National Bank of Ukraine key policy rate was raised to 25%.
Therefore, if attempts to keep rates at the previous level continue, the volume of borrowing from hryvnia instruments will remain low.
RESEARCH TEAM Taras Kotovych
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