In autumn, the Ministry of Finance of Ukraine is due to issue a new state-guaranteed financial instrument – government treasury notes. The move is intended to give citizens the opportunity to safeguard and increase their foreign exchange savings.
Mr. Oleksii Tkachenko, Director of the General Department of Banking supervision has communicated that investing household savings in these securities will prove to be lucrative: “The government treasury notes will be issued in paper form at face value of 500 USD with a yield of 8–10%. These securities will be more liquid than other financial instruments.”
According to Mr. Oleksii Tkachenko, any citizen will be able to buy government treasury notes worth UAH 150 thousand, without having to produce identification documents. However, citizens will be required to produce identification documents when purchasing treasury bills worth more than UAH 150 thousand.
The Ministry of Finance of Ukraine will initially sell government treasury notes via the Oschadbank, which is a state-owned bank with the most extended branch network. Thereafter, it is envisaged to offer the possibility for all banks willing to engage in T-bills trading to act as dealers selling these securities to individuals.
“Thus, the Ministry of Finance of Ukraine will provide the Oschadbank with information on quoted selling prices for treasury notes every ten days as the accrued interest income should be taken into account every time the quoted selling price is calculated. The Oschadbank will set the repurchase price for these liabilities, which may deviate from the quoted selling price by no more than 1%,” explained the Director of the General Department of Banking supervision.
The government treasury notes with a maturity of 2 years will come with four tear-off coupons for interest payments due every six months. The person willing to receive interest payments will be able to exchange the coupon (one of four) for accrued income at the Oschadbank.
Mr. Oleksii Tkachenko has said that in the event of a sale of government treasury notes before maturity, the potential loss of yield to maturity will not be critical, making up 1%. “On any working day a holder of treasury notes will be able to sell these securities at the Oschadbank or use them as collateral against the loan extended by the bank,” the NBU expert affirmed.
With Ministry of Finance being the issuer of government treasury notes, regardless of the financial standing of banks engaged in government treasury notes trading, the interest payments will be made and government treasury notes will be redeemed by the state via the Oschadbank.
“This is a reliable financial instrument for households. Furthermore, every day individuals will have the opportunity to sell it very quickly, and the most importantly, avoid commercial risks as the state guarantees the repayment of principal and interest, stressed Mr. Oleksii Tkachenko, pointing out that an increase in the financial instruments available in the market is viewed as a positive indicator of the economic development of Ukraine.