The Ministry of Finance collected enough hard currency in two weeks to repay the principal and interest on bonds maturing tomorrow. Nonetheless, the MoF had to raise interest rates on new placements.
UAH bills brought UAH3.1bn (US$85m) to the budget at yesterday's auction, including UAH3bn (US$83m) from the "reserve" bond and UAH49m (US$1.3m) from military bills. The interest rates for ordinary and military securities did not change. But for the one "reserve" bond, the expectation in the hyped demand prompted some participants to submit bids with a rate of 18.7%, which decreased the weighted average rate to 18.98%.
At the same time, the Ministry of Finance had to raise interest rates on USD-denominated bills to attract enough funds for tomorrow's repayments.
Yesterday, the Ministry offered three USD-denominated instruments: six-month and nine-month military bills and, for the first time in more than a year, ordinary USD-denominated paper, also with a six-month maturity that was three weeks longer than six-month military paper.
For both issues of semi-annual bills, the cut-off rate was increased by 50bp to 4.75%, but the weighted-average rates changed differently. For the military paper, it increased by 49bp to 4.74%, and for the ordinary paper by 34bp to 4.59%. The rate increase for nine-month bills turned out to be smaller. The weighted average rate was 4.85%, which is 35bp higher than for a similar tenor last year, and the weighted average rate was 4.84% or an increase of 34bp.
A total of US$390.5m was raised in hard currency yesterday after the budget received only US$86m last week. But together, this is enough for tomorrow's US$409.3m of repayments and covers the refinance all USD-denominated debt repayments YTD.
ICU Weekly Insight: Jan. 24, 2024 – FX-Denominated Bills Support State Budget
RESEARCH TEAM: Taras Kotovych.
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