Budget financing remains active
The Ministry of Finance raised more than Hr 7bn ($242m) through military bonds on May 4, mainly through UAH-denominated bonds. But demand for FX-denominated bonds was also strong.
Yesterday, the largest demand was for 14-month securities, which came in above Hr 4bn ($137m) at face value, and provided the state budget with Hr 4.2bn ($142m), or almost 60% of all borrowed funds. The state budget received another Hr 0.8bn ($28m) and Hr 0.6bn ($21m) from three-month and semi-annual instruments, respectively.
Currently, domestic investors are most interested in military bonds with the longest tenure or with an interest rate of 11%, in contrast to shorter maturities that offer yields of 9.5% and 10%, respectively.
In total, UAH-denominated securities provided the state budget with Hr 5.6bn ($192m), which covers the government’s need to pay income on UAH-denominated bonds today and offsets part of budget expenditure for debt servicing earlier this year.
Investors were interested in FX-denominated bonds, too. After partial refinancing of debt repayments in hard currency two weeks ago, FX liquidity in the market is still high and was gradually absorbed by the Ministry of Finance in order to cover critical budget expenditures during wartime.
Another $50m was borrowed on May 4 in addition to $82m raised two weeks ago, which, together, now cover almost a third of USD-denominated repayments made in April.
Domestic funding remains at the usual level, averaging about Hr 6.5bn ($220m) per week. Such borrowings, of course, do not cover the government’s need to cover the budget deficit during wartime. However, it indicates that at least UAH-denominated redemptions can be refinanced thanks to the activity of banks and other domestic investors.
RESEARCH TEAM: Taras Kotovych
Complete report: 5 pages, at https://icu.ua/en
