Fixed Income

October 07, 2019

Ukrainian sovereign and corporate Eurobonds were broadly lower last week, with the government’s strategy to attract USD 50bn in foreign direct investments emphasizing an increase in populist rhetoric from new Prime Minister Honcharuk’s team. Also weighing on investors’ minds was the resignation of top reformer Oleksander Danyliuk from President Zelenskiy’s team after only 4 months on the job. Although the government passed a bill in Parliament that cancelled the list of state-owned companies that are not subject to privatization, we remain highly skeptical that privatization proceeds will exceed USD 2.0bn next year. The country’s sovereign Eurobonds with maturity in 2028, which are viewed as benchmark 10-year debt papers, fell 1.9% to close at 109.8/110.5 (8.4%/8.3%), and the medium-term benchmark Ukraine-24s dropped by 0.8% to 107.8/108.5 (7.0%/6.8%). The VRI derivatives (linked to Ukraine’s future GDP growth with expiration in 2040) edged down by 0.4% to 92.4/93.4 cents on the dollar