Fixed Income

June 30, 2015

Ukrainian sovereigns continued to show a volatile performance in the environment of restructuring talks, with quotes for actively-traded Ukraine-17s jumping by 6.3% last week after a drop of 3.1% a week earlier. A scheduled meeting for today (Jun 30) between Finance Ministry representatives, the Franklin Templeton bondholder group, and the IMF in Washington is considered to be a technical discussion of economic forecasts rather than actual debt negotiations. Nevertheless, the restructuring of Ukraine’s debt held by private investors looks inevitable, and creditors’ resistance against accepting a certain level of principal write-downs is a type of ‘poker face’ strategy, in our view. Benchmark long-term Ukraine-23s edged up by 1.0% to close at 52.6/53.1 (19.6%/19.4%). The USD 500mn bonds maturing in September, which remain on the front line of the restructuring along with a Jul 24 USD 120mn coupon payment to service the Ukraine-17 issue, added 2.6% to 53.4/54.9.