Fixed Income

August 13, 2018

Most Ukrainian sovereign Eurobond issues fell sharply last week as investors saw the country’s international currency reserves decline to the minimum “safe” level ahead of nearly USD 1bn in coupon payments coming due in September. If the state has to dip into its reserves again, the hryvnia could suffer a sudden decline against the dollar, hurting economic growth. The longest outstanding issue, Ukraine-32s, dropped by 3.7% to 86.2/87.2 (9.1%/9.0%). Meanwhile, Ukraine-19s, which are due in just over one year from now, were less affected, edging down by 0.6% to 101.3/101.8 (6.5%/6.0%), as investors expect these bonds to redeemed with no drama. The VRI derivatives (linked to Ukraine’s future GDP growth with expiration in 2040) slumped 5.2% to 58.4/59.4 cents on the dollar.