Fixed Income

March 02, 2020

Ukraine’s sovereign Eurobonds suffered substantial losses last week amid bearish external investor sentiments due the global flu virus outbreak. Concern over the volume of emerging-market debt was also a factor in the selling. The latest data suggests that the total debt for 30 emerging-market countries reached USD 73 trillion, which represented a 2.7x rise over the past 10 years. The data includes China, which has seen its debt skyrocket along with its fast economic growth. China’s total corporate, household and government debt has risen to a staggering USD 43tn from USD 10tn a decade ago. A gauge of China’s total debt has topped 300% of GDP, according to the Institute of International Finance. The longest issue, Ukraine-32s, sold off by 4.0% to 106.7/107.4 (6.6%/6.5%), and medium-term benchmark Ukraine-24s dropped by 2.2% to 113.2/113.9 (5.3%/5.1%). The VRI derivatives (linked to Ukraine’s future GDP growth with expiration in 2040) corrected by 2.4% to close at 103.3/104.3 cents.