Ukraine has successfully raised funds in the bond market at a time when Russian debt is becoming untradable. The proceeds from the bonds will be used to meet the needs of the armed forces of Ukraine, according to the Ministry of Finance of Ukraine, and to ensure the uninterrupted provision of the state’s financial needs under the war with Russia.
The main conditions of military government bonds were a nominal value of one bond to UAH 1,000 (US$33.44); with a one year tenure and a yield determined at the auction. The government bond auction took place on 1 March 2022.
According to bond traders, two tranches were issued with funds raised equalling somewhere between US$200 and US$300 million equivalent in local Ukrainian Hryvni. One trader put the amount at approximately US$277 million.
Participation in the auction was limited, with few or no institutional investors taking part, and one observer noting it would likely have been only local participation.
“It was an interesting question for a lot of people as to whether they could participate, given the nature of the bonds and what they were funding,” noted one fund manager, speaking on condition of anonymity. “There is a swirl of support for the wider situation but with the ESG mandates [restricting investment in weapons], there is definitely a question around bonds that would be used to potentially fund the war. However, at this stage that is probably still a question, not an answer.”
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