Fixed Income

April 23, 2018

Ukrainian sovereign Eurobonds sold off rather heavily last week after Finance Minister Oleksandr Danyliuk admitted that the country has failed to meet two key conditions for continued cooperation with the IMF. The conditions are the adoption of a law on an anti-corruption court and the introduction of a mechanism to adjust heating tariffs to market rates. Also importantly from the point of view of the IMF, it is now unlikely that the legalization of rural land trading, a hot-button political issue, will be passed before the presidential election set for March 2019. The benchmark long-term Ukraine-27s issue slumped 2.7% to close at 99.6/100.3 (7.8%/7.7%) and the longest outstanding sovereign, Ukraine-32s, slid 3.2% to 93.5/94.5 (8.2%/8.0%). Medium-term Ukraine-23s also took a 1.9% hit to end at 101.7/102.5 (7.4%/7.2%). The VRI derivatives (linked to Ukraine’s future GDP growth with expiration in 2040) edged down 1.2% to 68.0/69.0 cents on the dollar.