A landmark event took place in the country: the National Bank raised the discount rate immediately from 10 to 25%, officially introducing a policy of not just expensive, but very expensive money in the country. No, this is not a record, there have been discount rates in Ukraine and higher. No, this is not a disaster, because the worst consequence of the expensive money policy is the lack of credit, and we didn’t have it anyway.. But we see some warning signs. They are connected not so much with the rate itself, but with the reaction of the Ministry of Finance, which in a healthy economy should closely and regularly interact with the National Bank, and in our country, it seems, these structures do not even congratulate each other on holidays.

Everyone hoped that the Ministry of Finance would take advantage of the increase in the discount rate in order to increase the yield, and, accordingly, the demand for government bonds. But no. So far, as we can see, the increase in the NBU discount rate to 25% has not prompted the Ministry of Finance to increase the profitability of government bonds, although the demand for them is getting worse from auction to auction. Because no matter how the Ministry of Finance talks about the fact that war bonds are about patriotism, bonds are still about making money..

After an increase in the key rate, especially such a sharp one, it becomes extremely profitable to store money (in fact, this is the purpose of the increase), respectively, the yield of other accumulative instruments will also grow, including those with NBU certificates of deposit, which banks love so much. But at the same time, the rate of profitability on OVDP was not increased.

It’s good that at least they made changes to the law, and now it will not just be fixed at the level of 11%, but floating. The “floating” formula is so complicated that, obviously, the Ministry of Finance still does not give up the idea of \u200b\u200bselling government bonds exclusively to patriots and by no means to speculators. In addition, we believe that the Ministry of Finance will reduce the offer at auctions in the coming months.. And the offer will be relevant for a limited number of participants, and the profitability itself this year will be about 20%. The decline in demand for government bonds is obvious, since the country is losing economically more and more, and the prospect of economic recovery is not calculated in 2-5 years.

Already, in the Association of Ukrainian Banks, the National Bank's application of the refinancing rate on long-term and short-term loans is considered by 27% as a springboard to bankruptcy of up to 20 banks. There is nothing surprising in this at all: if other businesses go bankrupt during the war, then why can't banks go bankrupt. Still, the list should be announced so that citizens do not put their hard-earned money on expensive deposits precisely with those respected bankers who tie their business model to the NBU refinancing rate. However, even the healthy part of the banking system will face problems, because the real sector has already faced them..

The country is losing its territories, the potential for the state to profit from normal economic activity is decreasing, and new loans are not free financing, but new debts of the country, from which we have not seen an opportunity to exit in future years.. During the three and a half months of the war, the infrastructure of Ukraine has been destroyed, regions have been captured, there are catastrophic human losses, relations with energy importers have been damaged, gasoline prices have increased by more than 40%, and with the onset of the heating season, inflation will increase. Already in May, inflation in Ukraine accelerated to 18% in annual terms from 16.4% a month earlier.

This is in the future a decrease in consumption in the country, and an increase in debt on loans, and an increase in the level of poverty of the population. Gross domestic product of Ukraine decreased in the first quarter of 2022 by 15.1% in annual terms. The government's forecasts of a 30-50% drop in the economy tell us that they are not even trying to make an accurate forecast, and the actual situation could be even worse.. Prime Minister Denys Shmygal stated this in an column for The Economist.. The run-up in the forecast by 20% from officials is a powerful signal of misunderstanding of the country's prospects. There are also estimates that Ukraine's GDP against the backdrop of the war will decline this year by about 45%. Economic growth can be expected to recover in 2023, but will be weak. This is discussed in the World Bank's World Economic Outlook..

That is, it is not worth expecting objectively that the profitability of government bonds will increase and demand will increase.. The forecast for government bonds for the summer of 2022 is moderately negative. The rate will be around 20%, demand will fall. For the population, government bonds should not be considered for investment, as well as deposits. There will be no more convenient time to invest in government bonds, even if the war ends in June.

Every citizen of the country should now take care of himself and his family, and not about the banking sector of Ukraine. We have always been optimistic about the feasibility of keeping money in the banking sector. But Ukraine's foreign policy in recent years has shown that people are not the first priority. New external loans at the end of 2021 were the leverage for rising heating prices for households this year. As a result, we have a war going on, and prices are rising. Therefore, everyone should now remember that it is not so much important to earn as it is important to keep your savings..

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