Auction schedule for 2Q16

Обзор облигаций 24.03.2016 The MoF published its 2Q16 auction schedule and slightly changed its policy at the primary market. In 1Q16, the MoF held auctions twice weekly with strict limits for bonds offered on Tuesdays. For 2Q16, the limits for bond offerings on Tuesdays have been removed. In 2Q16, the MoF will not offer 1.5-year bonds, of which UAH0.27bn has been placed so far, and possibly a small portion of these bonds could be sold next week. Next quarter, zero-coupon bonds with maturities from three months to 12 months will be offered weekly, and 2-year and 3-year maturities could be offered bi-weekly. Most importantly, the MoF will offer USD-denominated bonds monthly: 2-year bonds in April and June, and 1.5-year bonds in May. Investment implications: The 2Q16 auction schedule is not significantly different from that in 1Q16, and we anticipate demand to be similar. Most likely, the MoF will not sell 3-month bonds and only a small portion of longer maturities are likely to be sold, as 2-year and 3-year bonds should generate most of the budget proceeds as USD-denominated bonds are the most attractive for the market. Primary market interest rates should be similar to the yield curve set by the MoF in 1Q16, with UAH-denominated bonds interest rates in the range of 18-20% and USD-denominated interest rates at 7.5-8.0%.