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Concorde Capital Research: MinFin of Ukraine raises local bond rates in second straight week

October 10, 2018 | Cbonds

Ukraine’s Finance Ministry raised USD 127.2 mln, EUR 30.0 mln and UAH 1.5 bln (a total of UAH 6.0 bln in the equivalent) at its weekly local bond auction held on Oct. 9. These are the highest weekly auction receipts since Aug. 7.

The highest auction receipts – USD 105.8 mln – were received from placing USD-denominated bonds maturing in January 2020. The government satisfied 12 out of 13 bids while increasing the cut-off interest rate to 7.50%. USD-denominated bonds maturing in 2020 were last placed on Sept. 11 at 5.95%. MinFin also satisfied 15 out of 18 bids for 9M USD-denominated bonds for USD 21.4 mln at 7.0% – the same interest as last week.

MinFin satisfied two bids for 8M EUR-denominated bonds, drawing EUR 30.0 mln at 4.60% (an increase from 4.07% on Sept. 25).

The lion’s share of UAH auction receipts - UAH 1.4 bln - came from the sale of 3M bonds, which were sold to 15 out of 16 bidders at 19.00% (vs. 18.91% last week). MinFin also sold 6M, 9M and 18M UAH-denominated bonds at the unified interest rate of 18.50%. The sale of 6M bonds to five out of seven bidders brought in UAH 10.3 mln. The government satisfied all five bids for 9M bonds and two bids for 18M bonds. These receipts totaled UAH 30.2 mln and UAH 0.2 mln, respectively.

Evgeniya Akhtyrko: A 3.5% (USD 0.59 bln) drop in gross international reserves in September forced the government to increase the interest rates for its local Eurobonds, as their placements remain the only available source for reserves replenishment.

The rise in rates for USD-denominated local bonds maturing in 2020 created an unprecedented situation at Ukraine’s debt markets. Now, local bonds maturing in 2020 have higher interest rates than Ukraine’s Sept.'20 international Eurobonds, which are currently traded at 7.35%.

We expect MinFin will try to raise at least USD 300-400 mln by selling local Eurobonds at auctions in October. Their interest rates will stay high owing to the absence of other sources of foreign currency inflow.

Company: Ukraine

Full company nameUkraine
Country of riskUkraine

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