ICU Bond Market Insight, 14 Sep. 2022: Bond replacements in progress
On Sep. 13, the Ministry of Finance offered new 1.5-year paper, which replaced the 13-month bills. Again, most of the funds were raised through FX-denominated securities.
Last week, the Ministry of Finance started replacing UAH bonds offered on the primary market: instead of five-month bills, seven-month paper was introduced; 13-month bills were equated to the 12-month instrument. Finally, instead of 13-month paper, new 1.5-year bills were offered yesterday. Interest rates are set similarly, 16%, as it was until last week for the 13-month bills.
The new issue turned out to be quite popular, but it brought the budget only UAH166m (US$4.5m) out of UAH187m (US$5.1m) raised in local currency. although shorter bills received quite a lot of bids, the volume of demand was even less than last week.
So, the situation of low proceeds was slightly corrected by FX-denominated securities. Bullet bills denominated in euros with a maturity in June 2023 received only EUR3.9m of demand, most of which was accepted. The issue of bills with the put option was bought by one participant, but for EUR30m.
The Ministry of Finance keeps interest rates on military government bonds in local currency low, preferring borrowings in hard currency both on the domestic market and through support from international partners. Therefore, the demand in the local market remains small and does not contribute to the increase of domestic borrowing in local currency.
RESEARCH TEAM: Taras Kotovych
See the complete report here.
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