The national Bank of Ukraine (NBU) plans in December to determine the sponsor’s platform E-bond in Ukraine to trade domestic bonds Treasury bonds (t-bills), and in April 2020 to configure the platform E-bond company Bloomberg.
According to the presentation of the national Bank, in April next year is also planned amendments to the agreements with primary dealers of their obligation to keep firm quotes on the platform of E-bond.
Another challenge, which the NBU has set itself for the first quarter of 2020, is to support the development of the market for government bonds, including through the participation of the Central Bank in the auction.
The national Bank stresses that the main goal is the creation of a centre of liquidity in the market of government bonds on the basis of modern trading platform.
The NBU reminded that you have already developed a Road map to the reformation of Institute of primary dealers of the Ministry of Finance, which conceptually defines the principles of implementation in Ukraine of the platform E-bond, changed the rules of trading government securities to facilitate transactions using the trading information system (TIS) and initiated primary placements of government bonds in TIS Bloomberg.
According to the presentation, when working via E-bond all the quotes are mandatory only when the primary dealers, are put in anonymous mode (the names only sees the sponsor) on the benchmark government bonds in local currency to the same conditions of payments (for example, T+1) and are solid for the other primary dealers. These quotes will also be available for viewing (not for acceptance) everyone.
It is assumed that the primary dealers to be market makers and requirements will be made stricter: the minimum volume of quotation will be increased from 1 million UAH up to 10-50 million UAH, the threshold of the transition to unilateral quotation raised from 10 mln UAH of trading of bilateral quotes per session to at least 50 million UAH.
A number of other requirements for market-makers it is proposed to maintain: double-quotes must be billed with a spread of up to 2% at least 80% of days in a month, to keep at least 75% of the time between 11:00 and 15:00.
The national Bank notes that the discussion remains the question of granting the right of primary dealers to authorize other contractors that they could not only see, but also to accept their quotations in the platform and perhaps also to put their quotes, which will be able to accept those who have authorized trade with such counterparties.
NBU notes that the inflows this year of $4 billion of non-residents contributed to a noticeable revival of the market of government bonds – as the primary placement and trading in the secondary market, which allowed the Treasury to reduce the yield of government bonds, but trading volume in the secondary market remained relatively low, and the market is mostly illiquid.
Currently, almost all transactions with government bonds on the secondary market are recorded on the Ukrainian stock exchanges. In particular, for 9 months. on the “Perspective” of 7.61 thousand transactions in 154,25 billion UAH, on the PFTS – at 9.53 thousand transactions in 96,46 billion UAH on the Ukrainian exchange – 115 trades at 1.03 billion.
At the same time, according to the Agency, the national Commission on securities and stock market of Ukraine (NSSMC) and exchanges criticized the idea of concentration of the secondary market of t-bills to foreign sites and try to offer their own alternative.
According to the NBU, securities Depository which keeps a record of all government bonds and municipal bonds average daily turnover of government bonds in the national currency on the secondary market in November is 422 million UAH, which is almost 2.5 times higher than in November last year. The peak of trading in the secondary market occurred in July-September this year, from 782 million UAH to UAH 604 million on average per day.
The volume of primary placement of government bonds this year rose to 209 billion from 65 billion in the past, including non-residents acquired respectively 119 billion and 13.2 billion, bringing the portfolio of government bonds grew from 6.4 billion UAH at the beginning of the year to 107,2 billion on 8 November.
The national Bank clarifies that in the secondary market non-residents since the beginning of this year, on November 8, bought government bonds at 33.7 billion UAH, and sold – 33.2 bln UAH, while during the whole of last year, respectively 17.8 billion UAH and UAH 26.4 billion.
In particular, in October of this year, foreigners bought in the primary government bonds by 4.4 billion UAH, in the secondary – 2.2 billion UAH, and sold on the secondary market of 1.7 billion UAH received another 3 billion due to repayment and payment of interest.