Government bond auction results: scant demand for USD-denominated bonds only

The MoF attracted insufficient demand, that being solely for USD-denominated bonds, at yesterday\'s auction. Of the five bonds offered yesterday - which included three local currency bonds (one of which was USD-indexed) and two USD-denominated bonds - the USD-denominated bonds received seven bids for total demand of US$8.69m. The MoF accepted just one bid for US$3.60m of the USD-denominated 2-year bond while it rejected all six bids which were submitted in the range of 8.90-9.30% for total of US$5.09m for the 12-month bond.

According to unofficial reports, the MoF has reached an agreement with VTB to repackage with the US$2bn loan that matures in early June, thus eliminating the need for refinancing via a new FX bond offering.

As the VTB loan appears to be resolved, the remaining three auctions scheduled for May (one auction tomorrow and two auctions next week) will most likely again attract low demand, mostly for USD-denominated bonds, excluding the \"friendly\" bids that are pre-arranged by the MoF. As the government only needs to refinance UAH1.15bn through the end of this month, we expect very little activity and relatively stable interest rates at these auctions.
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