Yesterday, Ukraine’s Ministry of Finance (MoF) raised interest rates on military bills, keeping the yield on reserve bonds unchanged. However, the rate increase was not proportional to the NBU’s recent decisions on the key policy rate.
For 1.5-year bills, the MoF raised the cut-off rate by 50bp to 15.6% and the weighted average rate by 29bp to 15.35%, satisfying 16 bids out of 21 received. However, in terms of volume, only 24% were satisfied, as the five rejected bids were, apparently, the largest. It is worth noting that the maximum rate in bids did not change (16%), and the minimum rate increased by only 10bp to 15.1%.
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The MoF’s decision regarding 2.5-year bonds was similar. The maximum bid rate did not change (17%), and the minimum increased by 50bp to 16.5%. The Ministry satisfied only 18% of total demand, and the cut-off rate was increased by 50bp to 16.7%. Also, the weighted average rate was increased by 50bp to 16.7%.
At the same time, the trend of increasing rates was avoided with the placement of reserve bonds. The cut-off rate remained unchanged at 13.99%, and the weighted average increased by 12bp to 13.92%. Demand for these bonds gradually declined, almost half from last week, but it still exceeded supply.
The MoF raised rates on military government bonds yesterday, but this can be thought of as a delayed reaction to the NBU’s December decision to raise the key rate by 50bp. But this is only a third of the total increase in the key monetary rate in a month. At the same time, the rates in bids received by the Ministry of Finance also do not require an increase in yields similar to the key rate, which allows the MoF to stay restrained in its decisions.
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