Kazakhstan sells KZT 432 billion of government bonds at four auctions

Kazakhstan's Ministry of Finance sold KZT 432.1 billion of government bonds at face value in four weekly auctions from 6 to 27 October, 96 per cent of its KZT 450 billion plan, the Kazakhstan Stock Exchange (KASE) said in its results notices.

The ministry's October schedule, published by KASE on 1 October, set out ten sales: KZT 140 billion on 6 October, KZT 120 billion on 13 October, KZT 100 billion on 20 October and KZT 90 billion on 27 October, in terms from one to 12 years. All ten took place on the dates planned. The executed orders came to KZT 466.1 billion in cash, the notices show.

Demand was ample at every sale. Five participants bid at each of the ten auctions, and active orders came to KZT 1.25 trillion against the KZT 450 billion on offer. KASE's own ratio of bids to the offer ranged from 1.6 for the 7.4-year bond on 13 October to 3.8 for the 2.8-year bond on 6 October. Yet the ministry sold less than it had offered in six of the ten sales, although that ratio was at least 2.1 in each of those six. The largest shortfall came on 20 October, when it sold KZT 34.5 billion of a KZT 50 billion offer of a 6.6-year bond; the 12-year line of 6 October, an 11.6-year bond, sold KZT 55.0 billion of KZT 60 billion, its results notice shows. The notices give the amounts and prices accepted and no reason for the cut-offs.

Ten sales, one curve

The table lists each auction as KASE reported it, by date. Amounts are in billions of tenge; the yield is the weighted average yield to maturity of the orders executed, or the single yield where all orders were executed at one price.

The fixed-rate bonds, MEOKAM and MEUKAM, show a curve that falls as maturity lengthens. The 1.1-year bond sold on 27 October yielded 15.53 per cent and the 2.2-year bond on 13 October 15.25 per cent, while the 7.4-year and 11.6-year bonds cleared at 13.90 and 13.89 per cent. Every fixed-rate sale cleared below the National Bank of Kazakhstan's base rate in force on the day: 16.25 per cent until 23 October, when the bank cut it to 15.75 per cent after the September step to 16.25 per cent. One bond was sold twice: the 2.8-year MOM048_0056 yielded 14.85 per cent on 6 October and 14.72 per cent on 20 October, when the ministry sold KZT 49.8 billion of it against KZT 184.1 billion of orders, the month's largest order book, according to the 20 October notice.

TONIA-linked bonds paid most

The two sales of METISKAM, bonds that KASE describes as indexed to the TONIA Compounded Index, built on TONIA, the overnight repo rate KASE calculates, carried the month's highest yields: 17.57 per cent for the 6.6-year bond on 20 October and 17.32 per cent for the 3.5-year bond on 27 October. Together they made up KZT 91.2 billion, or 21 per cent of the month's sales at face value. The 27 October sale of the 3.5-year bond was also the month's largest, KZT 56.7 billion against KZT 173.7 billion of orders, the results notice shows, and the same day's 1.1-year sale was the only fixed-rate sale held after the rate cut.

For banks and other holders pricing tenge assets, the auctions put numbers on the term structure that the base rate alone does not show: the ministry paid more for one and two years than for seven to 12, and the highest reported yields on the TONIA-linked bonds. The Issuance Calendar lists the sovereign's dated sales as their terms are published.