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Auctions Procedure

The Procedure of Placement Domestic Government Bonds

The placement of domestic bonds is carried out at auctions and is conducted by the National Bank of Ukraine by the initiative of the Ministry of Finance of Ukraine. Primary dealers and the National Bank of Ukraine are the participants in the placement of domestic government bonds. Primary dealers meet certain conditions and assume certain obligations. Under cooperation agreement, primary dealers cooperate with the Ministry of Finance, providing bilateral quotations of government bonds and the purchase of domestic government bonds at their initial placement, while the Ministry of Finance provides dealers with the exclusive right to purchase government bonds at the moment of its issue. Investors address primary dealers in order to purchase domestic government bonds on their behalf.

The placement of bonds has the following forms:

  • auction sale of bonds;
  • sale of fixed-income bonds.

Domestic government bonds are distributed through primary placement and reopening. New bonds are distributed through primary placement, which, under the terms of issue and the volume of rights granted to their owners, have not yet been in circulation. Domestic government bonds that in accordance with the terms of their issue correspond with the bonds in circulation by maturity, the size of coupon payments, if any, and the volume of rights granted to their owners, are distributed through reopening.

The redemption of the domestic government bonds and the payment of the coupon yields are executed on the terms provided during their initial placement. If necessary, the owners of government bonds can sell their bonds on the secondary market.

Procedure for Conducting Switch Auctions

Switch auctions and settlements based on their results are conducted in accordance with the procedure established by the National Bank of Ukraine with the agreement of the Ministry of Finance. Switch auctions are conducted via ETC Bloomberg.

A switch auction involves the placement of government bonds of one issue in exchange for government bonds of another issue denominated in the same currency, as well as the payment of the difference in the values of these bonds in cash to the account of the Ministry of Finance.

As a result of a switch auction, both new issues of government bonds and additional placements of outstanding government bonds may be placed.

The interest rate and/or placement price of government bonds are determined by a decision of the Ministry of Finance based on the results of the relevant switch auction. The placement price of new government bonds may be higher, lower, or equal to their nominal value.

The value (price) of previously issued government bonds to be credited to the issuer’s securities account as a result of the switch auction is calculated as the fair value of the government bonds, determined in accordance with the Resolution of the National Bank of Ukraine on the fair value assessment of securities, as of the date of settlement for the switch auction, taking into account the parameters known as of the date the auction was announced.

Based on the results of switch auctions, the National Bank conducts cash settlements, as well as redemption and cancellation of government bonds that are credited to the Ministry of Finance's securities account.

Primary dealers who are depository institutions and have concluded the relevant cooperation agreements for the development of the government securities market, in accordance with the Cabinet of Ministers of Ukraine Resolution No. 363 dated April 14, 2009 "On the Introduction of the Institution of Primary Dealers in the Government Securities Market", are allowed to participate in switch auctions.