In February the purchases of Ukrainian government bonds (T-bills) by non-residents saw sharp growth reaching UAH 1.08 bn. The last time such buys were registered was in July 2008. Bankers feel that European hedge funds that are returning to the Ukrainian market through banks backed by foreign capital – i.e. Citibank, Credit Agricole and Dragon Capital – are interested in the high profit margins of government securities.
Foreign investors began showing their heightened interest in T-bills back in November when interest rates had reached 28%. After the IMF refused to issue the fourth tranche of the stand by loan to Ukraine, T-bills became practically the only instrument for filling the budget coffers.
After a number of NBU limitations of hard currency operations on the Ukrainian financial markets, T-bills remained the only way that non-residents could quickly skim the cream off the top,” says President of the Ukrainian Analytical Center Oleksandr Okhrymenko. He continued, “The mechanism is simple. Financial institutions in Ukraine convert hard currency into hryvnia, buy government bonds and after a certain period of time dump them on the secondary market of state banks that are obligated to maintain the quotations of government securities convert hryvnia back into hard currency and turn a decent profit. In other words, if the influx of foreign investors continues to maintain this pace in the future, by the summer when investors begin converting their earnings from T-bills into hard currency en masse, the rate of the hryvnia may fluctuate.