Twelve-month military bills received more significant demand than last week with almost the same interest rates in bids, 14.65%, so did not require a cut-off rate increase.
Therefore, the MoF sold the planned UAH5bn of bonds without any changes in interest rates.Interest rates remained unchanged for a 1.5-year military issue, too.
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Bids were mostly with a 15.25% interest rate, as a few weeks before. Total demand was UAH22bn vs. a UAH5bn cap.
Only the 2.5-year military securities saw a large part of demand below last week's cut-off rate, causing the weighted average rate to edge up by 1bp to 16.24%.
While the MoF accepted only one-quarter of the demand for this instrument, the cut-off rate remained unchanged at 16.25%.All three military bills were oversubscribed, but the MoF reported that it accepted all bids, so most of the bids were accepted partially within the cap and in proportion to the bid size.
For the first time this month, some bids for 3.5-year notes were with interest rates below the cut-off level of 16.75%.
However, this demand was low without impacting the weighted average interest rate.In addition, the MoF sold US$200m of new 12-month FX-denominated bills.
The Ministry rejected two bids that required an increase in the cut-off rate and kept it unchanged at 4.62%.Finally, the MoF must be satisfied with this auction, which received enormous demand and budget proceeds without offering reserve bonds.
Significant oversubscription for military bonds allows us to expect reserve bonds not to return this month.
However, most bids have interest rates at or slightly below the cut-off level, so bond rates should stay almost unchanged soon.
The views expressed in this opinion article are the author’s and not necessarily those of Kyiv Post.
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