Fixed Income

July 17, 2017

Ukrainian sovereign Eurobonds were notably firmer last week after US Federal Reserve Chair Janet Yellen indicated that the Fed’s future interest rate increases will occur slowly. The statement lifted emerging-market bonds across the board, and there was additional EM reassurance from news that Chinese exports and imports rose at a double-digit pace, pointing to a continued recovery in global trade. Ukrainian internal developments were also bullish, as Parliament approved a pension reform bill in the first reading to clear the way for the next IMF disbursement. Ukrainian 10-year sovereigns advanced by 1.8% to 97.9/98.5 (8.1%/8.0%) and Ukraine-19s (due in 26 months from now) rose 1.1% to 103.9/104.4 (5.8%/5.5%). The VRI derivatives (linked to Ukraine’s future GDP growth with expiration in 2040) outperformed the sovereigns, jumping by 7.8% to 42.8/43.8 cents on the dollar.