ICU Bond Market Snapshot: August 31, 2022 – Kyiv Post


FX Invoices to the rescue.

Yesterday, the Ministry of Finance borrowed nearly 4 billion UAH ($107 million) for the budget. Only UAH 323 million ($8.8 million) was in local currency, and the rest was in hard currency.

Hryvnia bonds remain unattractive in primary auctions. Although demand and borrowing volumes have increased slightly, they remain weak with cautious attempts by market participants to indicate the desired level of interest rates.

While the top ask rate for 4-month bills remained at 18%, for 10- and 13-month notes the peak ask rates fell by 500bps and 700bps to 15% and 17%, respectively. But most of the offers were submitted with the usual interest rates and they were accepted by the Ministry of Finance. Therefore, an offer with maximum prices for each item was rejected.

The demand for good denominated currencies again proved to be a saving grace for the budget. Thanks to these instruments, it was possible to raise the equivalent of nearly 100 million dollars, mainly in euros. Most of the offerings were for shorter issues of US dollar-denominated bills, but in small volumes.

In addition, the Ministry of Finance offered bonds with put options, which provided the bulk of the proceeds: US$30.1 million and €50.2 million in euros.

The Ministry of Finance used a similar tactic at the end of July, when it was possible to attract three times more funds, thanks to both the hryvnia and foreign exchange instruments. Interest in the primary market has shown a decline since last week. Investors are looking for at least a minimal increase in UAH bill rates or the possibility of early repayment of hard currency bills.

However, given that large government bond redemptions will take place as early as October, it is unlikely that the Ministry of Finance will take action to raise rates in the coming weeks so that investors focus on the secondary market. .

RESEARCH TEAM: Taras Kotovych.

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