Ukrainian Finance Ministry lowers UAH bond cut-off rate ahead of anticipated National Bank policy rate cut

MOSCOW. Jan 28 (Interfax) - The Ukrainian Finance Ministry, which lowered rates somewhat on hryvnia-denominated domestic government bonds at auctions last Tuesday for the first time since April 2025, was able to lower them again at auctions this Tuesday thanks to reduced offerings and higher demand ahead of the National Bank's anticipated policy rate cut on January 29, Ukrainian media reported

The media quoted the Finance Ministry's website as saying the cutoff rate for 11-month UAH bonds fell to 16.19% per annum, from 16.35% last previous week, the rate for 18-month bonds fell to 16.95% from 17.10% and that for 38-month bonds to 17.34% from 17.49%.

The weighted average rates fell to 16.19%, 16.91%, and 17.30%, respectively.

The biggest drop was for 45-month benchmark government bonds, which banks can use to form up to 60% of their reserves: the cutoff rate for them fell to 13.5%, from 14.6% at the last such auction on January 6, and the weighted average fell to 13.47% from 14.44%.

The Finance Ministry reduced offerings of regular bonds at face value from the usual UAH 5 billion to UAH 2 billion at each auction, while the benchmark offering was raised from UAH 5 billion to UAH 3 billion.

Demand for the 11-month bonds increased from UAH 2.1 billion last Tuesday to UAH 8.4 billion this week, for 18-month bonds it rose from UAH 10.9 billion to UAH 11.9 billion and for 38-month bonds from UAH 13.1 billion to UAH 15.2 billion, while for benchmark bonds it fell to UAH 42.3 billion, from UAH 49.2 billion at the previous auction at the beginning of January.

The Finance Ministry accepted 86 of 187 bids, including only 17 of 65 for benchmark bonds, and raised UAH 9.57 billion, compared to UAH 7.45 billion the week before.

The National Bank has held its policy rate at 15.5% since the beginning of March 2025 after hiking it on three occasions since the middle of December 2024, prior to which it had kept it at 13% for half a year after lowering it from 25% in seven phases since July 2023.