Yesterday, the Ministry of Finance routinely placed the desired volume of bonds and lowered rates on all three instruments. However, demand at the auction was significantly lower than in the previous two weeks, so the rate reduction was restrained.
The volume of demand for 12-month bills amounted to UAH5.4bn, while the cap was only UAH3bn. Interest rates in bids were in the range of 14.49‒15.0%, but the offer was exhausted at 14.75%. The Ministry sold almost UAH1.6bn of bonds under non-competitive bids and only UAH1.4bn under competitive bids, thereby increasing the rate reduction step. The cut-off rate decreased by 14bp to 14.75%, and the weighted average slid by 3bp to 14.71%.
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The new issue of two-year military bills received the highest demand yesterday, almost UAH11bn. The MoF sold UAH4bn of bonds to bidders with rates not higher than 15.5%, which was 19bp lower than the previous auction. The weighted average rate slid by the same 19bp to 15.47%.
Demand for three-year notes decreased almost threefold to UAH5bn. Having satisfied almost all demand, the Ministry of Finance lowered the cut-off rate by 9bp to 16.2%, while the weighted average rate, on the contrary, increased by 11bp to 16.13%.
As a result of the auction, interest rate reductions since the beginning of the spring cycle of monetary policy easing already amounts to more than 200bp, so before the NBU revises the discount rate for the next six weeks, auction participants competed more cautiously for new bonds. After all, if the National Bank of Ukraine lowers the interest rate by only 50bp tomorrow, as predicted in its April forecast, the rate reduction for UAH bonds will already be greater. Further changes in rates will depend on the regulator's signals about the prospects of revising the key policy rate in the future.
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