Fixed Income

November 02, 2020

There was a surprising increase in quotes for Ukraine’s sovereign Eurobonds last week which ran against both global and local negative sentiments. We believe that one or two large aggressive investors may have been hunting for high-yield USD-denominated fixed income instruments. Ukraine faced a barrage of unpleasant political headlines last week that were dominated by charges of treason against the head of the Constitutional Court (KCU). The KCU announced a decision by which it recognized as unconstitutional several key provisions of anti-corruption legislation, undermining the strongest steps achieved by the country since 2014 in its fight against corruption. The hottest issue, Ukraine-28s, rose 1.3% to 108.5 (8.4% YtM), and long-term Ukraine-32s added 1.6% to 95.5 (8.0 YtM). Medium-term benchmark issue Ukraine-25s grew by 0.9% to 102.1 (7.3% YtM). However, the VRI derivatives (linked to Ukraine’s future GDP growth with expiration in 2040) dropped by 1.4% to 87.3 cents on the dollar.