ICU Weekly Insight, 9 August 2023 - Investors in no hurry to compete

The MoF more than doubled its borrowings yesterday, keeping the cut-off rates unchanged.

Demand for 14-month bills remained low. The Ministry of Finance received only five bids for UAH21m and satisfied demand in full at 17.8%, unchanged from last week.

Investors' interest in 1.5-year military bills increased. The total amount of demand increased 17 times compared with last week to UAH2.1bn, and the MoF rejected only one bid for UAH0.1m at 18.5%. Although the minimum rate in demand was at 18%, the cut-off rate remained at 18.35%, and the weighted-average rate increased by 8bp to 18.35%.

The Ministry again received considerable demand for "reserve" notes, which exceeded supply. Therefore, the MoF satisfied all bids, but most partially. The minimum rate in bids was 18.25%, but most of demand was at 18.5% and in non-competitive bids. So, bids lower than the cut-off rate didn't affect the weighted-average rate. The MoF satisfied all non-competitive demand in full and bids with rates below the cut-off rate. The rest of the participants received a part of the desired volume within the cap.

In general, investors have increased interest in primary auctions, but they are in no hurry to compete. Shorter instruments have much less demand than supply, so there is little need to compete for the desired volume. And for "reserve" notes, the competition is insignificant, and placement participants received almost the entire desired volume because demand exceeded the supply by only 11%.

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Research team: Taras Kotovych.

See the full report here.