New achievements

Обзор облигаций 06.04.2016 2Q16 started with a very active primary auction and significant budget proceeds, allowing the MoF to increase budget proceeds significantly from one auction and achieve new levels of interest rates. While the MoF raised a total of UAh1.85bn (local currency) and US$0.92bn (FX denominated) of budget proceeds for the entire 1Q16, yesterday's auction alone provided the state budget with UAH1.31bn and US$0.65bn of respective funds. In addition to the large amount of proceeds, the MoF extended the yield curve by adding 5-month and 3-month bonds. The rate on 5-month bonds was set at 17.90%, or just 10bp below the interest rate on 6-month bonds three weeks ago, While the 3-month bonds were sold at 16.20%. The rate for the 2-year USD-denominated bond remained at the same 7.85% level set two months ago. The lowest interest rate in submitted bids was 7.75%, which was 5bp higher than in February, but demand was too low to have an impact. The significant demand could have arisen from FX-denominated bonds that recently were very attractive for investors as they carry lower risk of local currency devaluation. As a result, all 15 bids were accepted of this highly concentrated demand. Demand for local currency bonds was mostly submitted by banks. While state-owned banks could generate a new portion of liquidity after yearly tax payments were paid in March, these investors focused on short-term bonds with a large amount of demand per bid. On the other hand, some banks could submit large bids to purchase bonds in their portfolio to follow the recently established new requirements for banks to provide social payments and salaries. The deadline to follow these requirements is at the beginning of May.