9 Jun 2022 11:35

Ukrainian govt ties military bonds' yield rate to NBU's key rate

MOSCOW. June 9 (Interfax) - The yield rate of military bonds, through which the National Bank of Ukraine (NBU) finances the budget, will be tied to the NBU's key interest rate, whereas the military bonds' annual rate has been 11% to date.

"It will be a floating rate calculated based on the National Bank's average interest rate for a one-year period, which ends on the first day of the month preceding the month when the next coupon payments are made and starts on the first day of the same month the previous year," the Ukrainian media said, citing the government's June 7 Decree No. 659, published on the government's website.

Earlier, by its May 13 decree, the government extended the maximum circulation period of these bonds from 15 years to 30 years.

All other terms remain unchanged: their nominal value of 1,000 hryvni, the coupon period of one year, the amount of issued bonds at up to 400 million hryvni.

As reported, the NBU on June 3 hiked its key rate from 10% to 25%, expecting that the Finance Ministry would raise the yield rate of its military bonds after that. The Finance Ministry, however, has so far refrained from raising the military bonds' yield rate, keeping it within the 9.5%-11% range, depending on their maturity date. Because of that, sales have dropped to 0.8 billion hryvni.

The NBU has acquired military bonds worth 120 billion hryvni since February 24. Meanwhile, the volume of borrowing on the market has been at 93.27 billion hryvni and the overall financing of the state budget at 411.88 billion hryvni over this period.