September GS primary market in Kazakhstan

04.10.00 00:00
/IRBIS, Oct 04, 00/ - IRBIS financial markets information agency has completed analysis of Kazakhstan GS primary market for September 2000. The data assessment indicated that Ministry of Finance (MOF) managed to advance in prolongation of domestic debt terms. This success is fundamental for MOF and is a propagation of August developments consisting of MEOKAM floatation of three years to maturity. Two and three year bonds took 51.3% in the total volume of MOF borrowings in September. Yields for three-year MEOKAM decreased for the month from 18.00 to 17.50% APR, two-year bond yields remained stable - 15.90%. For MEKKAM-12 yields fell from 11.99 to 11.00%, MEKKAM-6 - from 10.99 to 8.51%, MEKKAM-3 - from 9.50 to 9.12%. As a result, the total share of mid- term borrowings (two, three year maturity) increased in September to 49.1% from 28.0% in August. As above-stated data showed this process was accompanied by debt servicing cost decrease. The particular attention should be paid to September introduction of MEIKAM (18 month circulation term) indexed on devaluation. Despite limited demand from participants on previous auctions for MEIKAM with 3,6,9 months maturity, these securities displayed their attractiveness at repayment. The increased demand on this kind of securities should be expected in future. This is most important when rate of devaluation remains behind of inflation. Another one particular tendency in September is the MOF performance with negative balance of borrowings in conditions of exposure to debt terms prolongation. By results of the month, this number equals to KZT-3,079.0 mln. It means that repayments exceeded the sum of issued debt. As a result, the MOF debt issued in the form of GS decreased in September by KZT2,990.4 mln at face value. The performance of the National Bank on GS market (notes floatation) was different from that of MOF. Significant problem of "excessive funds" resulting in inflation forced the leading bank to be more active in regulating currency circulation (in contrast to August situation). Substantial August purchases on the forex market led to excess of money on banks accounts. These funds did could not flow to the real sector. At the same time, MOF was not able to seize money as it mostly worked with MEOKAM, which were in limited demand among investors. The consequences shortly affected both inflation and forex market as it indicated by first decade movements in September (i.e. when dollar rapidly strengthened at KASE). Thus, volume of short-term notes issue started gradually increase. In somewhat critical situation developed on Sep 08, NBK was forced to issue notes-28 for the first time. The measures brought effect at the second half of the month. Short-term money quotations raised and demand on the US dollar started to fall. At the same time, NBK temporary lost its ability to lower yields as it targeted on sterilization. Yield for notes-56 were fixed at 7.70%, notes-63 - 7.85%, and notes-70 - 7.81%, whereas the yield for notes-77 was lowered to 7.88% just at the end of September (when market stabilized). Thus, NBK was temporary forced to suspend its debt lowering policy. In September, at attracted volume of KZT13,664.4 mln the issuer repaid only KZT8,517.8 mln of notes. The month finished with positive balance of KZT2,067.7 mln. The total short-term debt of NBK grew up by KZT5,340.2 mln. For MOF and NBK this number was equal to KZT2,349.9 mln. Nevertheless, considering the limit of notes maturity, which is less than 77 days, temporal increase in capitalization of GS market in September should not be taken as refusal from debt lowering policy.