Fixed Income

July 31, 2017

Ukrainian long term sovereign Eurobonds saw a moderate contraction last week after rising steadily through most of July, as the news flow regarding Ukraine has been largely positive lately. The country’s economy grew by 2.5% according to preliminary estimates. Other good news came from London, were a court agreed to Ukraine’s request to suspend the judgment in a USD 3bn Eurobond case brought by Russia until Kyiv’s appeal against the verdict is concluded. The case is expected to be heard by the English Court of Appeal in January 2018. We believe that the dispute over the Russian bond will not end next year, allowing Kyiv to further postpone the USD 3bn redemption and the associated balance of payments outflow. Benchmark Ukraine-27s shed 0.5% to 98.4/99.0 (8.0%/7.9%) while Ukraine-19s (due 25 months from now) inched up 0.1% to 103.9/104.4 (5.7%/5.6%). At the latest domestic auction, MinFin was able to place domestic USD-denominated 2-year bonds even lower, at 5.34%, while raising US