Bondholders' portfolio volatility

Обзор облигаций 09.02.2016 Over the last few weeks, recent large bond offerings by the MoF significantly changed the bondholders' structure of domestic bonds as the NBU's share fell to 72.35% from above 77% at the beginning of the year. Meanwhile, the banks' share increased significantly on three occasions: up UAH11.9bn on 22 January, up UAH14.97bn on 1 February, and up UAH11.32bn last Friday. As the result, the banks' portfolio rose to UAH113.89bn, with its share rising to 21.13% from about 16% at the beginning of the year. The other residents' portfolio decreased their share in government bonds outstanding since the beginning of the year to 2.13%, but with the last week's issue of bonds their share was up to 2.20%. Investment implications: The banks' portfolio rose due to the following: (1) significant bond purchases at primary auctions as the MoF sold US$0.92bn of FX-denominated bonds this year, and (2) a significant increase of state-owned banks' share capital using government bonds, as approved by a government resolution at the end of January. Also, FX-denominated bonds outstanding slightly rose (the MoF repaid only US$0.33bn in USD-denominated bond redemptions) and a slight weakening of the hryvnia caused the portfolios to rise.