The National Bank of Ukraine and Ukraine’s Finance Ministry have completed a government debt deal (debt reprofiling) by exchanging the domestic government bonds held by the NBU for new bonds.

Out of the total portfolio of the NBU-held domestic government of UAH 360.6 billion, bonds worth UAH 219.6 billion were re-profiled. Bonds worth about UAH 145.2 billion were converted into long-term national currency bonds, which have with different maturities and yields pegged to the inflation rate. Meanwhile, bonds worth about UAH 74.4 billion were converted into long-term national currency bonds with different maturities and fixed interest rates. The remainder of the portfolio has been unchanged (with a fixed yield).

“The repayment of the re-profiled bonds will be evenly distributed over time -  bonds worth about UAH 12 billion will be repaid each year until 2047," said Finance Minister Oleksander Danyliuk. “This will help evenly distribute the burden on the state budget over 30 years.”

Fixed rate and floating rate bonds will serve to diversify interest rate risk. More specifically, if market interest rates fall, the Finance Ministry will pay less due to floating rate bonds, and if market rates go up, fixed rate will prevent the cost of borrowing from increasing to much.

“At the same time, by pegging the yield of some bonds to the inflation rate, reprofiling will contribute to the efforts to pursue a prudent fiscal policy, which is consistent with the central bank’s objectives to maintain a low and stable inflation rate,” said Deputy NBU Governor Oleg Churiy.

In addition, if required, the NBU will be able to conduct monetary operations using fixed yield bonds with different maturities.