Government bond auction results: scanty proceeds

The MoF held the last auction just before today\'s UAH2.61bn repayment, the largest scheduled for this autumn. However, despite the significant debt repayment, the MoF did not pre-arrange a \"friendly\" bid at the auction, or perhaps the NBU withheld liquidity out of fear of re-igniting on the type of volatility seen in the FX market last week.

Only three bonds were offered, in accordance with the schedule for this month: a 5-year local currency bond, a 7-year local currency bond, and a 3-year USD-indexed bond.

Only one bid was submitted, and that was for UAH160.0m of the USD-indexed bond at its usual interest rate of 9.30%. This could have been a bid, not only in light of last week\'s FX market volatility, but also because investors who are unable to buy FX are able to hedge their risks using USD-indexed bonds.

Although the MoF accepted the UAH160.0m bid prior to the large debt repayment, most of the debt repayment must have come from budget funds including taxes, proceeds from previous financings, and possibly FX received from the July Eurobond placement.
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