Lower borrowings at unchanged rates
The Ministry of Finance kept interest rates unchanged from the previous auction and raised only UAH3.1bn (US$85m) in local currency yesterday.
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The 14-month bills maturing at the end of September 2023 received the most significant demand. These bills currently have the highest interest rate and saw growth in activity: 33 bids yesterday instead of one bid a week ago. At the same time, the amount of demand at par value was only UAH2.9bn (US$80m), less than the UAH3.5bn (US$96m) raised last week. All bids were at 16%, the same as at the previous auction, so they were satisfied.
However, there were no bids at all for the two-year paper, the same paper that the Ministry of Finance placed last week with a rate of 14%.
The demand for five-month bills was low, but the vast majority of bidders were ready to buy them at a rate of 10%, so out of 24 applications, 22 were satisfied and almost UAH23m (US$0.6m) was raised.
The Ministry was able to attract another billion hryvnias for 11 months, satisfying a large bid for UAH1.2bn (US$33m) with a 20% interest rate, but they accepted only eight bids for only UAH23m (US$0.6m) at face value.
It was expected that investors would mainly be interested in securities with higher rates, especially the 14-month paper. Although this paper revived demand and will contribute to the increase in secondary market trading, it did not help to increase local-currency borrowings, which even decreased compared with the previous week. Therefore, without revising interest rates on UAH government bonds, the Ministry of Finance is unlikely to be able to sustainably attract more funds in the primary market.
ISW Russian Offensive Campaign Assessment, November, 9, 2024
RESEARCH TEAM: Taras Kotovych
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