reports
- Taras Kotovych
- Research Team
Weekly Insight -- Inflation falls sharply in March
Ukraine’s annual inflation slowed further to 3.2% in March from 4.3% in February, which came as a major surprise.A significant deceleration in consumer prices was largely due to a decline in food prices, which is highly unusual for this time of the year. Prices for food staples declined by 0.2% MoM implying an only marginal growth of 0.2% in YoY terms. A number of significant food basket components were significantly cheaper in YoY terms, namely eggs (-34.3% YoY), sunflower oil (-17.4%), sugar (...
- Taras Kotovych
Bond Market Insight -- UAH bond rates decline further
The Ministry of Finance decreased interest rates for two out of three offered UAH bonds yesterday, coming closer to a decrease in three-month NBU CDs interest rates. Yesterday's auction provided the state budget with UAH7.2bn proceeds, including UAH5.4bn in local currency and EUR42.9m. UAH proceeds were lower due to a smaller cap for 12-month bills and lower demand for three-year notes. However, this did not prevent the Ministry from continuing to lower rates for some instruments. Four weeks af...
- Taras Kotovych
Weekly Insight -- NBU reserves boosted by foreign aid
The NBU gross international reserves spiked 18% in March and 8% YTD to US$43.8bn as foreign partners provided a record volume of new loans to Ukraine.The largest credit facilities provided to Ukraine in March included a EUR4.5bn tranche from the EU, US$1.6bn loan from Japan, US$1.5bn from Canada, and US$0.9bn from the IMF. Meanwhile, the NBU spent US$1.8bn in FX interventions to keep the hryvnia exchange rate under control. Also, Ukraine repaid US$1.0bn in external loans over the month, mostly t...
- Taras Kotovych
Bond Market Insight -- Investors concentrate on short-term bonds
The MoF borrowed almost UAH6.8bn (US$173m) yesterday with a decline in interest rates. The greatest demand was for 12-month bills, which was almost twice oversubscribed. The range of interest rates in bids narrowed to 19bp: the lowest rate was 16.15% (up 3bp), and the highest rate declined by 11bp to 16.34%. Due to the cap, the MoF accepted bids with rates up to 16.25%, which was set as a cut-off rate or 10bp lower than last week. The weighted-average rate slid by 1bp to 16.23%.
- Research Team
Weekly Insight -- Ukraine’s real GDP recovers 5.3% in 2023
Ukraine’s real GDP grew by 5.3% YoY in 2023 following a 28.8% slump in 2022. The growth was supported by heavy government spending and recovery of domestic private consumption.Nominal GDP is estimated at UAH6,538bn (+25% YoY). In FX terms, GDP amounted US$179bn (+10% YoY) based on the 2023 official average exchange rate.
- Taras Kotovych
- Research Team
Weekly Insight -- Bond market reacts to NBU key rate cut
At the primary auction, the MoF lowered interest rates for UAH bonds by 20‒30bp following NBU’s surprise cut in key rates a week before. YTMs in the secondary market also declined.The MoF borrowed UAH16.3bn (US$419m) last week, including UAH10.5bn (US$269m) in local currency. Demand for UAH bonds doubled compared with the week before, accompanied by a decline in interest rates in most bids. Expectations of a decline in bond rates were high last week after the NBU cut its key rate and the rate on...
- Taras Kotovych
Bond Market Insight -- NBU cuts key rate—bond rates down
Yesterday, the MoF decreased interest rates for UAH bonds by 20‒30bp, accepting about half of the received demand.The largest demand and the most significant decline in interest rates were for 12-month bills. This paper was almost 3x oversubscribed—demand was UAH8.7bn while the cap was UAH3bn (US$77m). All bids were lower than last week: the highest rate was 16.6% (20bp lower), while the lowest was 16.25% (45bp lower). Due to the cap, the MoF set the cut-off rate at 16.5% and the weighted-averag...
- Research Team
Weekly Insight -- NBU surprises with a rate cut
The key monetary policy rate was lowered by 50 bps to 14.5%. This surprised the market since the latest macro forecast from the regulator indicated an unchanged rate until July. NBU stated that weakening inflation reached 4.3% YoY in February, FX market stabilized and inflows of foreign financial aid improved. The interest rate on the 3-month certificates of deposits (CDs) and the rate on refinancing loans were lowered by 150bps to 17.5%. NBU will amend the rules that determine the amount of li...
- Taras Kotovych
Bond Market Insight -- UAH borrowings increase
Demand for UAH bonds increased by almost a third at yesterday's auction compared with the previous week. Still, thanks to a more even distribution between the instruments, the Ministry of Finance increased borrowings by almost double, to UAH8.9bn (US$231m).
- Research Team
Weekly Insight -- NBU reserves down 4% in February
NBU gross international reserves decreased 3.8% in February and 8.5% YTD to US$37.1bn as inflow of foreign financial aid remains insignificant. The decline in reserves was driven by NBU sale interventions in the FX market that totalled net US$1.5bn in February. Also, Ukraine repaid nearly US$0.7bn of principal and interest to IFIs. Meanwhile, the government received US$0.8bn in grants from Japan and Norway, which replenished NBU reserves. Net FX borrowings in the domestic market were negative a...
- Taras Kotovych
Bond Market Insight -- UAH interest rates remain unchanged
Yesterday, the Ministry of Finance borrowed UAH7.6bn (US$198.2m) for the state budget, including UAH5.2bn (US$135.5m) in local currency. Proceeds from USD-denominated bills were US$62.7m, half compared with the previous week. Demand at yesterday's auction concentrated on 12-month UAH bills, which amounted to almost UAH6.6bn (US$171m), while the MoF set the cap at UAH4bn (US$104m). The MoF fully satisfied all non-competitive and competitive bids with rates below the cut-off level. At the same ti...
- Research Team
Weekly Insight -- Financial account significantly negative
In January, Ukraine’s financial account turned significantly negative while the current account balance improved markedly. The current-account deficit improved to US$0.5bn in January thanks to a better balance of trade in goods. Export of goods was up 12% YoY while imports surprisingly declined 1%. The balance of trade in services was little changed in December, but improved substantially vs January 2023, which reflects a decline in expenditures of Ukrainian refugees abroad. Migrant incomes fel...
- Taras Kotovych
Bond Market Insight -- UAH borrowings steady above UAH5bn per week
Yesterday, the Ministry of Finance attracted UAH11bn to the budget, half of which was in hryvnia. Overall, borrowings are down from the previous week by about a third, but they remain significantly higher than in late January and the first two weeks of February. The decrease was due to lower proceeds in foreign currency.
- Research Team
Weekly Insight -- Significant redemptions of domestic FX debt
Last week, the Ministry of Finance was able to refinance a significant portion of redemptions in euro. This week, a redemption of USD-denominated bills for US$453m is scheduled, and the MoF plans to raise about two-thirds of that volume in tomorrow's auction.
- Taras Kotovych
- Research Team
Weekly Insight -- Ukrainian Eurobond market in seasaw
Statements made by Russian officials after talks with the US and NATO have led to a significant increase in fear of a possible Russian invasion of Ukraine and worsened Ukraine's credit risk assessments by local and international investors. All this was happening on the back of the expected tightening of the Fed's liquidity support. This led to a sell-off of Ukrainian Eurobonds, which is likely to continue this week.
- Taras Kotovych
- Research Team
Weekly Insight -- Hryvnia weakens as liquidity flows in
VAT refunds and local-currency debt redemptions partially in favour of foreign investors increased demand-side pressures in the FX market and weakened the hryvnia exchange rate. This week, economic activity will begin to gradually recover after the holidays that may cause new exchange rate fluctuations.
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