19:46 08.10.2024

Finance Ministry boosts govt bonds sales to record UAH 24 bln, $150 mlin; adjusts rates in different directions

3 min read
Finance Ministry boosts govt bonds sales to record UAH 24 bln, $150 mlin; adjusts rates in different directions

The Ministry of Finance of Ukraine, which in October expanded the supply of hryvnia domestic government loan bonds from four issues to six, increased the sales of hryvnia bonds at auctions this Tuesday to UAH 24.08 billion from UAH 12.14 billion a week earlier and raised another $150 million at a currency auction.

In addition to the growth in sales, these auctions were distinguished by a different change in rates: if the Finance Ministry raised rates for 20-month and 32-month military bonds compared to the auctions a week ago from 15.1% to 15.25% and from 16.1% to 16.25%, respectively, then for 25-month bonds, the ministry increased the rates from 16.1% to 16.25% and from 16.1% to 16.25%, respectively; and 36-month benchmark bonds, on the contrary, it lowered them, respectively, from 15.6% to 15.1% and 16.59% to 16.1% per annum.

The Finance Ministry managed to achieve this result due to record demand for 25-month and 36-month benchmark bonds, UAH 27.79 billion (hereinafter at par) and UAH 33.76 billion, respectively, with an offer of UAH 5 billion at each of the six auctions, while for 20-month and 32-month bonds, demand matched supply.

Obviously, such demand and such auction results are associated with the increase in the required reserve ratio by 5 percentage points (p.p.) for almost all deposits from October 11 and the inclusion by the National Bank of the specified 25-month and 36-month bonds from October 15 into the number of benchmark government bonds, which can form 60% of mandatory reserves.

As a result, the ministry approved 12 out of 25 applications for 25-month bonds, and 15 out of 31 for 32-month bonds, while all applications were approved at four other auctions.

The "shortest" 12-month and "longest" 41-month securities were placed at the same rates, 14.65% and 16.8% per annum, respectively, and the demand for them was lower than the supply some UAH 2.40 billion and UAH 620 million, respectively.

Thus, the yield curve became broken in its middle section from 20 to 36 months, which can be explained by the interest of banks in benchmark government bond issues, of which there will be 15 from October 15.

As for the auction for the placement of dollar government bonds, despite the excess of demand over supply, $200 million against $150 million, the ministry failed to lower the cut-off rate, which remained at 4.66%, while the weighted average fell by only one basis point, to 4.65% per annum.

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