Yesterday, the Ministry of Finance borrowed UAH12bn (US$328m) for the budget, mainly in local currency, gradually accumulating more funds before upcoming debt redemptions.

Although next week’s debt redemption will be in euros, yesterday, the Ministry sold USD-denominated bills, accumulating funds for payments due in three weeks. The 11-month paper was sold mainly in competitive bids, but they were all at a rate of 4.85%, unchanged from the auction in early April. US$118m was received for the budget, slightly less than half of the USD-denominated redemption scheduled for the end of May.

The offerings of UAH bonds has undergone considerable changes. Of the UAH bonds placed in April, yesterday, the MoF offered only the shortest issue due in March 2024. Twenty-nine bidders wanted to buy these bonds, one for UAH500m (US$14m), but with an interest rate of 19%. Therefore, the MoF rejected this bid and satisfied the 28 bids for UAH111m (US$3m) at an 18.5% interest rate. The MoF sold most of the bills through non-competitive bids.

The Ministry of Finance replaced the "reserve" bonds. Bonds due in August 2025 were sold instead of bonds maturing in April 2025, usually sold last month. Demand was at UAH4.3bn (US$117m), even with slight competition. Part of the demand was submitted at a rate of 19.65%, 5bp lower than most of the demand (19.7%), and then they were sold in March. All demand was satisfied with a decrease in the weighted average rate by 1bp to 19.69%.

Another difference in the auction was the offer of ordinary (non-military) bonds maturing in February 2026. This is currently the longest maturity for bonds placed after the start of the Great War. The demand for them was only from a three participants. Only three bids including competitive demand for UAH3bn (US$82m), and non-competitive demand for an insignificant UAH6m (US$0.2m) (nominal value). Their interest rate is set at 19.75%, a level similar to "reserve" bonds maturing in November 2025. So, this could be another issue of "reserve" bonds if the Ministry of Finance and the NBU make appropriate decisions.

In general, the auction brought quite a good amount of funds to the budget with almost no rate changes. UAH debt redemptions will not be huge next week, so the level of UAH debt refinancing should even increase. The Ministry will seek hard currency repayments to be refinanced in multiple placements, separately in Euros in two weeks and in USD at the end of the month, according to the current auction schedule. Therefore, there is a good likelihood that the level of refinancing repayments will remain above 100% at the end of May.

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RESEARCH TEAM: Taras Kotovych.

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