Government Bonds Auctions and Global Market Dynamics: October Market Overview ??
?? Government Bonds Auctions. In October, the Ministry of Finance of Ukraine increased its placement of government domestic bonds by 46% MoM to UAH 103 billion, with UAH-denominated bonds reaching UAH 80 billion (+74% MoM). Concurrently, redemptions of government domestic bonds totaled UAH 74 billion. As a result, net government domestic bond borrowings for the January–October period rose to UAH 160 billion, with a domestic debt rollover rate of 149%. The yields on UAH-denominated government domestic bonds offered at auctions remained stable from 14.65% to 16.80%.
?? Consumer inflation continued to accelerate in October, rising from 8.6% YoY to 9.7% YoY. Core inflation, which excludes highly volatile components, increased from 7.3% YoY to 8.3% YoY. Key drivers of the overall index continued to be certain components of the food basket, with prices rising 10.8% YoY compared to 8.5% YoY in September. At the same time, transportation inflation continued to slow, dropping from 6.7% YoY to 5.7% YoY, supported by favorable dynamics in fuel prices (3.2% YoY).
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?? Foreign Exchange Market. The hryvnia maintained moderate fluctuations for the third month, hovering around USD/UAH 41.24 (-0.01% MoM). Bank client operations had a reduction in the deficit to USD 1.4 billion (-9% MoM), driven by a 17% MoM increase in foreign currency sales (USD 5.4 billion) and a 10% MoM rise in demand (USD 6.8 billion). Meanwhile, net demand from households grew to USD 1.4 billion (+27% MoM). Net foreign currency purchases rose by 6% MoM to USD 2.8 billion. To address the existing deficit, the National Bank of Ukraine increased foreign exchange interventions by 7% MoM to USD 3.4 billion, while external financing inflows in October amounted to USD 1.4 billion. Under these conditions, international reserves declined by 6% MoM to USD 36.6 billion (-6% YoY). However, full disbursement of approved financing is expected to restore reserves to over USD 43 billion (+8% YoY) by the end of the year.