MoF sells 3-year bonds

Обзор облигаций 24.01.2018 Yesterday, the MoF sold 3-year bonds for the first time since the end of October 2017. With the coupon rate set at 15.70%, the same level as 2-year bonds two weeks ago, 3-month and 6-month bonds also had cut-off rates at 16.00%, unchanged from last week. The MoF will receive UAH2.31bn of budget proceeds. Demand for 3-month bonds was in eight bids from 15.60% to 16.00%, all of which were all accepted, reducing the weighted-average rate to 15.89%, last seen in the first half of December 2017 before the key policy rate increase to 14.50%. Please note, as interest rate bids were lower, short-term borrowings could decline in a few months, signaling a yield-curve adjustment. The MoF accepted all bids for 6-month bonds, all of which were at 16.00%. Demand for 3-year bonds was mostly from non-competitive bids, and the MoF decided to accept only one competitive bid at the lowest rate and all non-competitive demand, thus raising UAH196.27m, setting the level for this maturity for the first time since the end of October 2017. As the MoF borrowed a significant amount of funds, interest rates becomes are flattening as the yield curve adjusts downward to 15.70-15.89% with the highest level of 16.00% at the 6-month maturity. The MoF could sell 5-year bonds next week at interest rates close to 3-year and 2-year bonds, depending on the NBU's key policy rate announcement this Thursday.