MECHANISM FOR OPTIMISING THE PORTFOLIO OF DOMESTIC GOVERNMENT BONDS TAKING INTO ACCOUNT MACROECONOMIC FACTORS

Анотація

Ukrainian domestic government bonds account for more than 85% of stock market turnover, yet institutional investors lack formalized frameworks for incorporating macroeconomic forecasts into portfolio decisions. War-induced volatility amplifies interest rate and currency risks. Existing Ukrainian research addresses these issues fragmentarily: either correlating macro factors with yields without portfolio optimization or optimizing portfolios using current yields without forecasting macro-driven changes. No prior work integrates the complete chain from scenarios to optimal weights. This study addresses how macroeconomic forecasts of the National Bank of Ukraine can substitute for unstable VAR models in yield prediction, what is the monetary transmission coefficient under structural breaks, and how currency diversification between hryvnia and dollar bonds should be optimized when exchange rate scenarios diverge while accounting for repricing effects. Methodologically, the framework implements two-stage approach. First stage models National Bank of Ukraine key rate as function of inflation and unemployment using central bank forecasts. Second stage links policy rate to domestic government bonds yields via parsimonious regression with crisis interaction. Portfolio optimization maximizes Sharpe ratio incorporating repricing through modified duration. Covariance matrix applies shrinkage to stabilize parameters. Key contribution is the first systematic mechanism for Ukrainian domestic government bonds market that operationalizes macro forecasts into rebalancing decisions. Unlike fragmented approaches, it delivers endto-end algorithm: from quarterly NBU forecasts through monetary transmission to optimal weights with explicit currency exposure and duration management. For institutional investors facing regulatory diversification requirements, this provides formal alternative to discretionary or naive strategies. Framework demonstrates how forward-looking macro information can be systematically incorporated into portfolio management in volatile emerging markets.

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