Yesterday, the Ministry of Finance raised UAH6bn for the budget, mainly in hard currency.\

UAH securities received modest demand yesterday. MoF received 25 bids for the 10-month instrument for UAH0.3bn, a third of what was bid for last week. Demand for 1.5-year paper more than halved to UAH1.6bn. At the same time, the MoF received 12 bids for three-year "reserve" notes for only UAH0.2bn – one-sixth of what was bid for last week. Almost all demand was in non-competitive bids (satisfied at the weighted average rate).

Demand was mainly unanimous. The Ministry fully satisfied all bids for 10-month and 1.5-year bills without changes in interest rates. For the three-year instrument, the MoF rejected only one bid for UAH0.4m, reducing the cut-off rate by 10bp to 18.5%.

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Demand was significantly greater than supply for FX-denominated bills. However, it was similar to the auction two weeks ago. The highest bid rate was 5%, and the lowest was 4.59%. So, the Ministry of Finance had enough room to manoeuvre, but sold US$100m worth of the bills. The MoF filled 30% of the volume under non-competitive bids and the remaining 70% under competitive bids. Some of competitive bids were partially satisfied within the cap after satisfying non-competitive demand and bids with rates lower than the cut-off rate.

Thus, the Ministry of Finance, in general, has reduced its fundraising by only by about a third compared with the previous week. Still, it is currently not raising much, even in the absence of international aid. At the same time, the reduction of rates on "reserve" notes signals that the Ministry seeks to reduce further the cost of servicing the domestic debt, so it will not refuse to lower rates under favourable conditions.

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Research team: Taras Kotovych.

See the full report here.

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