Both offerings attract demand

Обзор облигаций 30.10.2014 At yesterday's primary auction, the MoF offered two bonds, one of which was an EUR-denominated bond that has not been offered in more than a year. Last year, the MoF sold EUR-denominated bonds twice. While last December the bonds with a 6-day maturity were sold just prior to receiving the debut tranche of Russian financing, the bonds offered last September 2013 had to be refinanced. Only EUR40.0m of bonds at a significantly higher interest rate of 7.50%, amounting to two-thirds of the EUR60.0m of bonds at 4.80% sold last September 2013, were redeemed yesterday. Only one bid was submitted for these bonds, likely from the investor who held the bonds. The MoF still needs additional refinancing. The MoF also sold UAH895.06m of 2-year local currency bonds, receiving three bids at interest rates in the range of 16.30-16.50%. The cut-off interest rate was set at 16.50%, and the weighted interest rate was 16.49%. Similar bonds were sold in September and October 2014 at similar interest rates of 16.50% but at significantly lower volumes. Yesterday's primary auction allows the MoF to refinance all local currency repayments and a majority of the EUR-denominated repayments. While the EUR-denominated bonds were the most likely purchased by the investor whose bonds were redeemed, demand for local currency bonds could be mostly supported by domestic QE with some market demand.