Government Bonds Auctions and Global Market Dynamics: Weekly Market Overview (29 July - 2 August)
?? Government bonds. As a result of the auction, the Ministry of Finance of Ukraine increased borrowings to UAH 5.6 billion in hryvnia and USD 97 million in foreign currency bonds. Annual domestic government bonds (4 million units) were in demand for UAH 3.1 billion at rates ranging from 14.60% to 14.65%. The existing bids were satisfied with an increase in the weighted average rate by 1 bp to 14.65%. Participants submitted bids for UAH 2.2 billion for two-year government bonds (4 million units). Most of the demand was for a 10 bp rate hike, so the Ministry of Finance approved increasing key policy rates to 15.50%. At the same time, demand for the longest domestic government bonds (5 million units) remained restrained at UAH 30 million, with competitive bids amounting to UAH 5 million. The maximum yield on the bonds was maintained at 16.80%, while the weighted average rate decreased to 16.76% (-4 bp). For the offer of annual domestic government bonds in USD (200,000 units), the entire demand was met with unchanged base rates at 4.66%.
?? Foreign exchange market. On the interbank market, increased demand led to a moderate weakening of the hryvnia to USD/UAH 41.23 (+0.3% WoW). Throughout the week, the predominance of demand over supply rose to USD 579 million (+32% WoW). Among bank clients, net demand amounted to USD 358 million (+55% WoW) with a 13% WoW increase in demand and stable currency supply (+1% WoW). Individuals also increased their net currency purchases to USD 221 million (+7% WoW). Under these conditions, the National Bank of Ukraine continued to support the market with interventions totaling USD 767 million (-2% WoW).
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?? Global news. In the international market, growing investor concerns about the state of the US economy under the Federal Reserve's tight policy led to increased volatility in key stock and bond indices. Additional pressure on market sentiment was exerted by a series of weaker-than-expected quarterly reports from US tech companies and an unexpected tightening of monetary policy by the Bank of Japan. Data published by the US Department of Labor indicated a significant cooling of the labor market. In July, the number of new jobs was limited to 114,000, significantly deviating from the market's forecast of 175,000 and the revised figure for June of 179,000 (-13%). Unemployment data also fell short of expectations, rising to the highest level since October 2021 at 4.3% (4.1% forecast). The ISM report on the US manufacturing sector also proved unfavorable for the markets, with the PMI indicator deepening its decline to lows since November 2023 amid a drop in the employment component and persistent price increases.
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