Fixed Income

March 11, 2019

Political concerns finally caught up with Ukrainian sovereign Eurobonds last week as investors took a closer look at the possibility that President Poroshenko could be replaced by actor Volodymir Zelenskiy, an un-tested novice with no experience in economic, military or foreign policy. The decline in Ukrainian sovereigns came despite an overall upbeat trend in global fixed income instruments. Yield-hungry investors are pouring money into emerging markets at the fastest rate in a year, but the Ukrainian Eurobond universe is staying out of most portfolio managers’ focus due to the risks associated with the upcoming presidential election in the country. The longest outstanding issue, Ukraine-32s, dropped by 1.1% to 84.9/85.9 (9.4%/9.2%) and medium-term Ukraine-24s shed 0.8% to 93.3/94.3 (9.3%/9.1%). The VRI derivatives (linked to Ukraine’s future GDP growth with expiration in 2040) fell 2.7% to close at 62.3/63.3 cents on the dollar.