National Bank of Ukraine sees yield on domestic govt bonds as acceptable

MOSCOW. May 4 (Interfax) - The current yields on Ukraine's domestic government bonds, which vary from around 15% to 16% per annum depending on maturity, are higher than current inflation and inflation expectations, including the projected inflation of 9.4% by the end of 2026, which means that the instrument remains attractive, Ukrainian media quoted National Bank of Ukraine (NBU) Deputy Governor Vladimir Lepushinsky as saying.

"We currently see totally appropriate yields. The Finance Ministry's last borrowing was under 15.2% to 16.2%, taking into account 7.9% inflation in March and the year-end forecast of 9.4%. This is an entirely acceptable figure for investors, [including] individuals, legal entities, and certainly banks. We see that the debt market has potential," Lepushinsky was quoted as saying at a news briefing.

Debt policy is the Finance Ministry's responsibility, and the NBU currently has no worries about the recent decline in demand and auction volumes, he said.

The Ukrainian financial system has seen a positive rollover of over 130% since the start of the year, as the Finance Ministry has drawn UAH 182 billion, with repayments of just over UAH 140 billion, while the 2026 budget law stipulates a 100% rollover, he said.

"Again, the Finance Ministry itself manages the borrowing process based primarily on fiscal needs," Lepushinsky said.

If more intensive borrowings are needed, the Finance Ministry could issue benchmark bonds that banks could use to partially build up their mandatory reserves, and the NBU could join dialogue within a formalized forum at the Financial Stability Council, he said.

"I'd point out that, despite the inflation forecast has been raised, we see this inflationary surge as temporary, that is, the baseline scenario is that inflation will be back on a steady downward trajectory as early as next year," Lepushinsky said.

While the dynamics of investments in domestic government bonds vary from month to month, public interest in this instrument is growing, as the market is developing, access to these bonds is broadening, and this market segment is becoming increasingly common, he said.

"This product is becoming increasingly common and widespread, and the situation where rates on domestic government bonds were significantly higher than deposit rates should gradually level out. This process is already underway, and so rates are more than attractive and not only cover expected inflation but also provide a certain income in real terms," Lepushinsky said.