Thanks to Bloomberg, the Ministry of Finance has received a new tool for managing public debt
27 February 15:21
The Ministry of Finance, together with the National Bank of Ukraine, held its first switch auction of government bonds on the domestic market using a new feature of the Bloomberg auction platform. This was reported by the Ministry of Finance, Komersant ukrainskyi reports
In Ukraine, auctions of government bonds through the Bloomberg platform have been held since 2019. The government bond auction, which took place on February 19, 2025, was the first to use the new function of this platform.
What are the advantages of switch auctions?
Government bond auctions (switch auctions) allow the exchange of previously issued government debt instruments (soon-to-be-matured or illiquid instruments) for new or recently placed securities. This innovation contributes to more efficient public debt management, it helps to smooth the public debt repayment schedule and ensures more effective liquidity management.
This innovation allows market participants to submit bids for new bonds in exchange for bonds with shorter maturities or less liquid securities in one transaction, instead of two separate transactions. This significantly improves operational efficiency for counterparties and simplifies the settlement process.
According to Yuriy Butsa, Government Commissioner for Public Debt Management, the new feature of the Bloomberg auction platform increases the efficiency of debt transactions in the domestic market and provides market participants with an additional tool for managing their portfolios of Ukrainian government bonds.
“Bloomberg’s enhanced switch auction feature provides an optimal, flexible and scalable solution for primary market issuers who would otherwise have to conduct this process manually or develop their own solution,” said Kathryn Furber, Global Head of Emerging Markets Trading Products at Bloomberg.
What is known about the Bloomberg auction platform
This platform is part of Bloomberg’s corporate solutions for central banks and government financial institutions. It is used to conduct auctions in an electronic format.
The platform allows market participants to track auctions, submit bids, and provide a secure environment for debt issuance and repurchase, as well as other open market transactions.
The platform is fully integrated with Bloomberg Terminal’s information, analytical and communication tools and is used in more than 40 countries.
How the first government bond auction went
Market participants were offered to exchange short-term government bonds maturing on February 26, 2025, for new bonds that will mature in almost two years – by January 13, 2027. It is estimated that the value of the bonds to be exchanged would be 107.722% of their face value, which would provide additional income to investors.
In particular, the new bonds will pay interest four times: on 16 July 2025, 14 January 2026, 15 July 2026 and 13 January 2027. The circulation period of the new bonds was 691 days. No limit was set on the volume of the bonds’ placement.
The volume of satisfied bids (at face value) at the auction amounted to UAH 432,000,000.
The weighted average yield of the placed bonds was 16.65%.
The cost of the placed bonds (UAH) is UAH 438,791,040.
The NBU changed some rules to make the auction possible
In order to create new functionalities for government securities market participants, the Regulation on the Conduct of Depository and Clearing Activities and Ensuring Settlement of Securities Transactions by the National Bank of Ukraine was updated.
First, the NBU introduced a new type of settlement for transactions involving domestic government bonds (OVDPs) – “delivery of securities against delivery of securities”. This makes it possible to settle a new type of domestic government bonds placement – through auctions for the placement of domestic government bonds with simultaneous exchange for domestic government bonds of another issue in circulation. The relevant possibility was introduced by the Resolution of the Cabinet of Ministers of Ukraine No. 1053 “On Amendments to the Resolution of the Cabinet of Ministers of Ukraine No. 80 of January 31, 2001” dated September 13, 2024.
Second, the NBU expanded the opportunities for cross-border settlements of domestic government bonds transactions through a link between the NBU’s depository and the foreign depository Clearstream Banking Luxembourg (Clearstream).
In addition to the existing “delivery of securities without payment” settlements, the NBU introduced settlements based on the “delivery of securities against payment” principle. Under this type of settlement, the NBU’s depository will ensure that cash settlements are made simultaneously with the delivery of domestic government bonds. At the same time, cash settlements will be made between accounts opened in the NBU’s Electronic Payment System. This is in line with the best international practices, which require settlements in “central bank money” for securities transactions.
