Taras Kotovych, Fixed-income analyst, Investment Capital Ukraine:
Total domestic government bonds outstanding declined UAH1.21bn to UAH185.72bn as the result of Monday's deals as the banks' portfolio fell UAH1.19bn to UAH75.41bn. No principal repayments were scheduled this Monday.
Investment implications: The decline in government bonds outstanding could be the result of the MoF's secondary market deals buying back bonds or investors’ exercise of put options on FX-denominated bonds. Had these deals been executed on Monday in local currency, they provided support to liquidity on Tuesday. In contrast, had these deals been executed using FX, the funds could have been sold to Naftogaz to pay Gazprom. We will not know for certain until the MoF publishes the actual information on whether bonds were issued or redeemed. However, as the MoF had only UAH2.31bn on its treasury accounts in local currency, we can deduce that the decline in bonds outstanding is the most likely the result of an exercised put option on FX-denominated bonds.