Fixed Income

July 17, 2018

Ukrainian sovereign Eurobonds rose solidly for a second straight week as investors viewed Ukrainian yields as attractive compared to emerging market bonds from several other peer countries. However, we see this as a technical rebound rather than an improvement in investors’ general perception of Ukrainian risk. In Ukrainian local business news, the National Bank unexpectedly raised its key policy rate from 17.00% to 17.50% on Jul 12. The regulator said that the tighter policy would help to bring inflation back down to the target range in 2019. Also important was Parliament’s approval of an amendment to the anti-corruption court bill demanded by the IMF. The move brings the country closer to resuming the long-delayed existing loan program. Establishing the court, adjusting gas prices, and honoring budget commitments are the conditions to unlock the next loan tranche under the IMF program, which expires next year.