Finance Ministry raises rates on marketable government bonds by 0.5 percentage point after raising the key rate by 1 percentage point

On Tuesday, the Ministry of Finance of Ukraine, at the primary auctions for the placement of domestic government loan bonds, after the National Bank increased the key rate from 14.5% to 15.5% per annum, raised the cutoff rates for exchange bonds with a maturity of 16 and 27 months by 0.5 percentage points (pp) to 16.35% and 17.45% per annum, respectively.

According to information on the Ministry of Finance website, interest in these auctions increased compared to the previous week by 2.3 and 6.3 times, respectively, to UAH 2.16 billion and UAH 3.8 billion (nominal), although it turned out to be lower than the offer of UAH 5 billion at each auction.

Some investors expected a more significant rate hike, but the Finance Ministry rejected six out of 30 applications to purchase 16-month bonds at a rate of up to 16.85% for a total of UAH 1.8 billion and five out of 36 applications to purchase 27-month bonds at a rate of up to 17.95% for a total of UAH 760 million.

As for the auction for the sale of bonds maturing in three and a half years, included in the list of benchmark domestic government loan bonds for the formation of mandatory reserves, since Tuesday, thanks to high demand from banks, the Ministry of Finance has even managed to reduce the cut-off rate by 0.1 percentage points – to 15.89% per annum.

Of the 40 applications submitted for a total of UAH 22.34 billion at rates of up to 16.5%, 26 applications were fully or partially satisfied, which made it possible to place all bonds for UAH 5 billion and achieve the target issue size of UAH 20 billion.

As a result, at three auctions on Tuesday, the Ministry of Finance raised UAH 8.54 billion, compared to UAH 6.67 billion a week earlier.