Fixed Income

September 28, 2020

Ukraine’s sovereign Eurobonds sold off sharply last week amid turbulence on global financial markets, as investors started to demand a higher risk premium for holding emerging market debt, offsetting some of the valuation impact of the low interest rate environment. In domestic Ukrainian news, the government reported that farmers have harvested 37.6mn tonnes of grain from 10.3mn hectares, or 67% of the sown area. The volume includes 25.1mn tonnes of wheat and 7.8mn tonnes of barley, with the latter’s harvest completed last week. The grain harvest is expected to fall to 68mn tonnes in 2020 from 75 tonnes in 2019. Ukraine-25s slid 3.3% to 101.5 (7.5% YtM), the Ukraine-28s issue fell 3.4% to 110.3 (8.2% YtM), and the long-term Eurobonds with maturity in 2032 were down by 4.2% to 96.1 (7.9% YtM). The VRI derivatives (linked to Ukraine’s future GDP growth with expiration in 2040) performed similarly, losing 4.0% to 92.0 cents on the dollar.