The National Bank of Ukraine is discussing the issue of a possible entry into the secondary market with its portfolio of domestic government bonds, as this may be one of the elements of strengthening monetary transmission and sterilizing excess hryvnia liquidity, NBU deputy head Serhiy Nikolaychuk said.
“In addition, this step will reduce the negative impact of the issue. We are working on technical issues and consulting with our stakeholders,” he said in an interview with Delo.
Commenting on the opinion that the National Bank’s entry into the market with its bonds may reduce the effectiveness of the primary auctions of the Ministry of Finance, Nikolaychuk noted that the reason for the low results of these auctions lies in the low rates offered to buyers, which was confirmed by insignificant volumes of attraction even before the resumption of the secondary government bonds market in early August.
“In order for the auctions of the Ministry of Finance to be successful, it should move towards the government bonds yield that the market wants to see. The NBU, in the event of an exit with its portfolio of government bonds, will focus primarily on the market yield of government bonds. Otherwise, such a step would make no sense” – said the deputy head of the NBU.
According to him, now for the most liquid hryvnia government bonds with a circulation period of 6-12 months, rates in the secondary market have stabilized at the level of 20-25% per annum, while the Ministry of Finance offers 12-14%.
Speaking about the situation in the foreign exchange market, Nikolaychuk pointed out that today the balance of supply and demand in the foreign exchange market of the National Bank “is more or less satisfactory.”
“And according to our estimates, it should not worsen during September and October. We also expect that, thanks to international assistance, we will be able to keep gold and foreign exchange reserves at a sufficient level,” the deputy head of the NBU said.
Currently, the total value of government bonds in the portfolio of the National Bank in terms of the principal debt is UAH 619.5 billion, while the total government bonds in circulation are worth UAH 1 trillion 280.9 billion, and the portfolio of banks is UAH 497.2 billion, non-residents – 66.9 billion UAH, legal entities – UAH 65.8 billion and individuals – UAH 30.8 billion.
