ICU Weekly Insight: March 13 - UAH Borrowings Increase

Demand for UAH bonds increased by almost a third at yesterday's auction compared with the previous week. Still, thanks to a more even distribution between the instruments, the Ministry of Finance increased borrowings by almost double, to UAH8.9bn (US$231m).

Last week, most of the demand—almost UAH6.6bn (approximately 90% of total demand)—was concentrated on 12-month bills, and the MoF rejected a third due to the cap. Yesterday, demand was more evenly distributed: only half of the demand was for 12-month bills, a third was for two-year paper, and only the rest for three-year notes.

The demand for 12-month securities was UAH4.9bn (US$128.6m), and due to the cap, the total raised was UAH4bn (US$104m). The MoF fully satisfied non-competitive demand and bids with rates that were below the cut-off rate, while the rest of the bids were filled partially within the cap and in proportion to the size of the bid. The cut-off rate remains unchanged, but the weighted-average rate slid by 4bp to 16.76% due to some demand, with lower rates starting from 16.7%.

For the two-year and three-year instruments, the Ministry satisfied the all demand, UAH3.3bn (US$86.1m) and UAH1.5bn (US$38.2m), respectively. The cut-off and weighted-average rates remained unchanged from last week.

Today's large UAH bond redemption increased demand for new bonds, as some investors immediately participated in the primary auction to reinvest repayments. The rest of the investors will gradually reinvest funds in the secondary market or participate in next week's auction.

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