Concorde Capital Research: Ukraine raises UAH 6.7 bln from local bonds
December 4, 2019
Ukraine’s Finance Ministry raised UAH 3.4 bln and USD 53.9 mln from the sale of its local bonds at its weekly bond auction on Dec. 3 after drawing UAH 2.4 bln at the auction last week. The auction’s UAH receipts came from the sale of 3M and 3.5Y bonds, while USD receipts were generated by the sale of 15M and 2Y bonds.
The lion’s share of the auction’s UAH receipts – UAH 3.3 bln – came from the sale of 3.5Y bonds to 14 out of 19 bidders with a weighted average interest rate of 12.38% (vs. 12.40% for 4Y bonds placed last week). In addition, MinFin sold 3M bonds to five out of seven bidders for UAH 55.4 mln with a weighted average interest rate of 13.06% (vs. 13.95% for the same bonds two weeks ago).
The sale of 15M local Eurobonds to 19 out of 23 bidders brought USD 35.1 mln. The weighted average interest rate inched up to 4.08% from 4.02% three weeks ago, but the cut-off rate of 4.25% remained the same. The rest of USD receipts, or USD 18.8 mln, came from the sale of 15M bonds to 24 out of 30 bidders. The weighted average interest rate dropped to 3.88% – from 5.25% for the same bonds placed on Sept. 10 – which is a historic low for USD-denominated local bonds placed by MinFin.
Evgeniya Akhtyrko: While the auction results look quite satisfactory, there are some noteworthy moments. The initial MinFin schedule for this auction didn’t assume the sale of long-term UAH denominated bonds, nor any placement of local Eurobonds. This implies that MinFin isn’t very confident that the high demand for UAH-denominated bonds will persist.
Indeed, most of the demand for long-term bonds is generated by non-resident investors, who can leave the market very fast in case their confidence deteriorates. Therefore, MinFin is seizing this moment in which the interest for UAH-denominated long-term bonds is still high.
The goal of the latest local Eurobond placement was likely to refinance the redemption of local Eurobonds for USD 160 mln on Dec. 12. However, the demand of market participants for local Eurobonds wasn’t high, and now it’s not obvious that MinFin will always find satisfactory bids for its local Eurobonds at much lower rates.
Country of riskUkraine
Redemption (put/call option)
М/S&P/F— / — / —
Company — Ukraine