Fixed Income

June 22, 2015

Ukrainian sovereigns slid sharply last week, with benchmark Ukraine-23s losing 5.4% to 51.5/53.0 (20.0%/19.4%) amid the real possibility that the Finance Ministry could freeze coupon payments until a debt restructuring deal with private creditors is reached. There is also major uncertainty about how a USD 3.0bn bond due to the Russian government in December will be treated. President Poroshenko bluntly called the sum a “bribe” to ex-President Yanukovich that was provided to keep Ukraine from signing its European Union trade pact, but he stopped short of saying that Kyiv does not recognize the debt. Ukraine’s USD 2.6bn Eurobonds due in July 2017, which we expect to be extended by at least 5 years, lost 3.1% to close at 46.8/47.5 (55.3%/54.2%). In contrast, the USD 500mn bonds maturing in September, which are on the front line of any restructuring deal, advanced by 1.9% to 52.8/54.3.