Fixed Income

April 22, 2019

Quotes for Ukrainian sovereign Eurobonds were hit with volatility last week after a ruling from Kyiv’s district administrative court that the country’s largest bank PrivatBank was rescued illegally by the state back in 2016. The government was forced to inject UAH 160bn (USD 5.5bn) in Ukrainian taxpayer funds to restore PrivatBank’s solvency at that time. Since then the bank has transformed its business model and reformed its corporate governance, appointing an independent Supervisory Board. This controversial ruling about “illegal nationalization” represents a threat to the country’s financial system. Nevertheless, we believe that the noise around PrivatBank’s case could be just a symptom of dirty politicking in the final stages of the presidential election. The country’s longest outstanding issue, Ukraine-32s, edged up by 0.4% to close at 91.4/92.1 (8.6%/8.4%), and medium-term Ukraine-24s were unchanged at 97.4/98.1 (8.5%/8.3%). The VRI derivatives (linked to Ukraine’s future