The National Bank named the first issue of domestic government bonds (OVGZ) – benchmark OVGZ with which banks will be able to form up to 50% of the increased required reserves – this issue (ISIN UA4000227045) maturing August 7, 2024, which the Ministry of Finance first placed at an auction on January 3.
“According to estimates of the NBU, such a step will contribute to a more active participation of banks in the primary market of government bonds and, as a result, prevent the emission financing of the budget deficit in 2023 and the absorption of part of the free liquidity of the banking system,” the central bank said in a statement on its website on Friday.
According to it, the NBU adopted the relevant decision № 7 on January 5, it comes into force on January 10.
Only one buyer bought the securities at the initial auction on January 3 – for 1.077 billion hryvnyas at 19.25% per annum.
As earlier reported, on December 8, the NBU announced that from January 11 it will raise the required reserve ratio for current accounts (demand deposits) in UAH and foreign currency by 5 p.p. – The bank will allow to cover up to 50% of the total volume of the required reserves at the expense of benchmark OVDPs.
The mandatory reserves for the period from December 11, 2022 to January 10, 2023 amount to UAH 69.76 billion, while the volume of banks’ funds in certificates of deposit is about UAH 466 billion.
According to estimates of the National Bank, such a decision will allow the Ministry of Finance to attract an additional UAH 50 billion.
In the Memorandum with the IMF on the Monitoring Program with the Board of Directors it was stated that over 60% of the OVDP-benchmarks will be new securities, while up to 40% will be already circulating in the market with maturity after January 1, 2024.
Currently, the Ministry of Finance lists 10 issues of benchmark OVDPs on its website, of which the National Bank has so far recognized only one new issue listed above. In addition, the Ministry of Finance lists three more issues maturing in 2023, three in 2024: in February, May and October, and one each maturing in 2025 (in February), 2026 (in May) and 2027 (in May).
