ICU Bond Market Insight: June 22, 2022 – FX bills dominate budget financing   – KyivPost

Yield curve for Hryvnia-denominated domestic government bonds placed at last two auctions

At the auction held on Wednesday, June 22, almost Hr 7.7bn ($262m) were raised for the state budget.

The vast majority of funds were raised through FX-denominated bonds, which brought in the budget $220m (Hr 6.5bn), or 85% of all funds raised.

Demand for Hryvnia-denominated securities is usually not high in June.

On June 22 bonds maturing in September received almost Hr 1.2bn ($39m) worth of demand, while bids for longer maturities totaled just Hr 54m ($1.8m).

All military bonds were sold at the usual interest rates of 9.5‒11.5%, which were set by the Ministry of Finance at the beginning of Russia’s full-scale invasion.

The offer of USD-denominated bills helped the Ministry of Finance to improve borrowings and replenish FX reserves before $0.5bn of redemptions due on June 23.

Although the number of bids was low, the budget received $222m from six and 12-month FX-denominated bills. Interest rates on them remained unchanged and were set at 3.5% and 3.7%, respectively.

Although Hryvnia-denominated military bills brought slightly more funds to the budget than in previous weeks, the total amount of borrowings received through this instrument remains low.

In March and May, the budget attracted Hr 29bn ($1bn) per month through military bonds; in April the Ministry of Finance was able to borrow Hr 20bn ($0.7bn).

Just Hr 2.3bn ($79m) was borrowed via this instrument in June.

This month, an additional Hr 3.5bn ($120m) was raised through non-military bonds, which are not admitted for trading on the secondary market.

This will lead to less borrowing in June than in April.

RESEARCH TEAM   Taras Kotovych

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