Fixed Income

July 03, 2017

Ukrainian sovereign bonds were only moderately lower last week despite a notable rise in sovereign yields across the EU following European Central Bank comments that sent signals of a reduction in monetary stimulus. Bond yields in Germany, France and Italy all hit their highest levels in two months. Outside the Eurozone, US Treasury yields were also near six-week highs, while 10-year yields in Britain and Japan hit their highest levels since March. The analyst consensus is now around an 80% chance that the ECB will raise rates over the next year, up from just 20% at the beginning of June. The price on outstanding Ukrainian 10-year sovereigns declined by 0.5% to 96.6/97.0 (8.2%/8.1%), while Ukraine-19s (due in 26 months from now) inched down 0.1% to 102.7/103.4 (6.3%/6.1%). The so-called VRI derivatives (linked to Ukraine’s future GDP growth with expiration in 2040) remained on the rise, adding 0.6% to close at 38.8/39.3 cents.