Bond Market Insight – MoF Insignificantly Moves Interest Rates

The MoF once again borrowed large funds for the state budget, including UAH14.bn and US$153m. Interest rates hardly changed.

Demand concentrated mainly on two and three-year bonds. The MoF sold the planned UAH6bn of two-year bills, rejected just 134% of demand, and decreased only the weighted average rate by 1bp to 15.59%. Demand for three-year notes was slightly below the cap, allowing the MoF to accept all bids without any changes in interest rates.

Twelve-month bills saw just UAH102m of demand, with interest rates ranging from 14.6% to 14.65%. As bids were closer to the lowest rate, the MoF kept the cut-off rate at 14.65%, but the weighted average rate slid by 3bp to 14.62%.

The MoF decreased interest rates for the longest paper due in February 2028. The MoF accepted seven out of eight bids, as only one small bid amounted to less than UAH0.1m and had an interest rate of 16.85%. The MoF accepted another competitive bid at 16.8% and accepted all non-competitive demand at 16.8%, and decreased the cut-off and weighted-average rates by 10bp to 16.8%.

USD-denominated bills allowed the MoF to borrow another UAH6.3bn (US$153m). This paper was added to the offering on Monday. Demand was insignificantly above the cap, so bidders purchased almost the needed amount.Finally, this month, the MoF borrowed UAH72.4bn, the largest monthly amount during the Great War. Proceeds fully exceeded redemptions, improving rollover in total and in each currency.