Yesterday’s debut primary auction of 2025, provided the state budget with only a UAH6bn out of the UAH20bn offering.
All three UAH military bonds received low demand, just 1-10% from the cap. However, interest rates in bids were close to the recent cut-off levels, causing just a 1-4bp decline in interest rates.
At the same time, the four-year paper offering was almost 10x oversubscribed, UAH48bn vs. UAH5bn cap, with attempts to get a premium for the longer maturity.
Compared with the recent primary placement of a 3.5-year note, the cut-off rate slid by 25bp, but compared with the last offering of bonds due in May 2028 in early December 2024, the cut-off rate rose by 100bp and the weighted-average rate by 140bp, to 16% and 15.99%, respectively.
Yesterday’s auction shows that last Autumn’s demand for military bills appears to be exhausted, and banks concentrated on the new four-year paper, which may become reserve bonds.
We expect the government will continue to offer the same military bonds and new four-year notes next week.
The views expressed in this opinion article are the author’s and not necessarily those of Kyiv Post.
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