Ukrainian citizens and businesses, including banks, have purchased more than UAH 1 trillion worth of domestic government bonds on market terms, making investments in bonds the second largest source of state budget financing after international aid, the Finance Ministry said on Wednesday.
“Thanks to the funds raised from government bonds, we were able to finance more than 200 days of our defense and protection, which is equivalent to 15% of Ukraine’s GDP in 2023,” Finance Minister Sergii Marchenko was quoted as saying in the release.
According to the Ministry of Finance, there are currently more than UAH 1.6 trillion worth of domestic government bonds in circulation, of which the share of commercial banks is 42.2%, the National Bank – 41.5%, legal entities – 10%, individuals – 3.8%, non-residents – 2.4%, and territorial communities – 0.1%.
It is emphasized that the volume of investments by individuals has increased by about 600 times since 2016, and by more than 2.4 times since February 24, 2022. Legal entities have increased their investments in government bonds 7 times since 2016 and 2 times since the beginning of the full-scale invasion.
The Ministry of Finance notes that from January 2022 to March 2024, coupon income was paid to Ukrainian individuals and legal entities (excluding banks) in the amount of UAH 31.5 billion, and to foreign ones – UAH 19 billion, which amounts to UAH 50.5 billion in total.
The agency emphasizes that, along with profitability, an important characteristic is the high liquidity of domestic government bonds in the secondary market, as investors can sell bonds at any time at the current market price. This is confirmed by the statistics of the average daily volume of transactions at par value, which amounts to about UAH 2.4 billion in equivalent, which is 26% higher compared to the average daily figure in 2021. Such data indicates that there are a sufficient number of market participants to ensure efficient trading.
“Convenient digital solutions for purchasing bonds, market yields that exceed inflation expectations, and a 100% guarantee of repayment from the state make government bonds the most attractive instrument on the market,” the Ministry of Finance summarized.
As reported, the Ministry managed to lower interest rates by another 0.1-0.27 percentage points (p.p.) at the last primary auctions for the placement of government bonds on Tuesday, May 21, bringing the total decrease to 0.92-1.37 p.p. after the National Bank cut the discount rate from 14.5% to 13.5% per annum on April 26. For one-year securities, the rate decreased from 15.15% to 15.05%, for two-year securities – from 16.2% to 16.08%, and for three-year securities – from 17.2% to 16.93%.
According to the Settlement Center, the number of registered private investors reached 183.56 thousand at the beginning of May this year, compared to 166.12 thousand at the beginning of this year, 126.79 thousand at the beginning of last year and 22.79 thousand at the beginning of 2022.
