Fixed Income

July 11, 2017

Ukrainian sovereign bonds saw a moderate retreat last week after media reports that the country will not receive a scheduled USD 1.9bn disbursement from the IMF this month due to insufficient progress on key reforms. Market players were also displeased to hear that the National Bank lowered its forecast for 2017 GDP growth from 2.0% to 1.6%. The central bank said it was not changing its GDP growth assessments for 2018 and 2019, leaving them at 3.2% and 4.0% respectively. Outstanding Ukrainian 10-year sovereigns dropped by 0.6% to 96.4/97.0 (8.3%/8.2% and Ukraine-19s (due 26 months from now) declined by 0.4% to 102.7/103.3 (6.3%/6.1%). However, the VRI derivatives (linked to Ukraine’s future GDP growth with expiration in 2040) remained on the rise, advancing 2.9% to close at 39.9/40.4 cents, a level not seen since early 2016.