Finance Ministry lowers yields on 2-3-year govt bonds by 5-10 bps amid strong demand
For the second week in a row, the Ministry of Finance has managed to slightly lower yields on two-year and three-year domestic government bonds at primary auctions for the second week in a row, thanks to demand significantly exceeding supply: this time, the reduction amounted to 5-10 basis points (bp).
According to information from the Ministry of Finance on its website, the cut-off rate for bonds maturing in 22 months was 15.65%, and the weighted average was 15.6%, whereas a week ago they stood at 15.7% per annum.
In addition, the maximum and minimum rates in bids to purchase these bonds also fell: from 15.79%, to 15.7% and from 15.55%, to 15.5%, respectively.
As for three-year government bonds, compared to the previous auction three weeks ago, the cut-off and weighted average rates fell to 16.08% from 16.15% per annum.
With offers totalling UAH 2 billion at each auction (here and below, at face value), demand for two-year bonds amounted to UAH 6.82 billion, and for three-year bonds, it was UAH 8.69 billion; accordingly, the Ministry of Finance accepted 27 out of 33 and 23 out of 39 bids.
At the auction for the sale of one-year domestic government bonds, demand only slightly exceeded supply – UAH at 2.29 billion – so the cut-off rate remained at 15.15%, while the weighted average rate fell by only 1 basis point, to 15.13% from 15.14% per annum. The Ministry of Finance fully or partially accepted all 22 bids.
As reported, at the auction for the sale of two-year government bonds a week ago, the cut-off rate fell by 9 basis points, and the weighted average rate by 3 basis points.
In addition, last Tuesday, after a month-long hiatus, the Ministry of Finance offered a new issue of 42-month potential benchmark government bonds, which banks can use to form up to 60% of their required reserves, and, due to demand exceeding supply by a factor of 2.8, was able to lower the rates on these bonds by 7-9 bps: the cut-off rate to 12.83% and the weighted average rate to 12.75% per annum.
Total sales this Tuesday amounted to UAH 6.29 billion, compared to UAH 8.83 billion a week ago, as the supply of benchmark government bonds stood at UAH 5 billion.