Fixed Income

June 09, 2020

Ukraine’s sovereign Eurobonds saw big gains once again last week as the COVID panic continued to recede and global investors climbed back into the riskiest emerging-market debt papers. As measured by JP Morgan’s EM bond index, the extra yield to hold speculative-grade debt over US Treasuries declined to 820 basis points on Friday. The spread, which reflects borrowing costs in countries such as Bahrain and Sri Lanka, had peaked at 1200 bps in late March. Currently, the yield spread of Ukraine’s 10-year Eurobond over US Treasuries stands at 690 bps. The medium-term Ukraine-25s issue gained 2.6% to 101.5/102.5 (7.5%/7.3%) and Ukraine-28s advanced by a solid 4.2% to 111.1/112.1 (8.1%/7.9%). The VRI derivatives (linked to Ukraine’s future GDP growth with expiration in 2040) surged by 6.5% to 89.0/91.0 cents on the dollar.