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Fixed Income Weekly (January 04, 2017)

 

Macro & politics update

  • Ukraine’s current account deficit amounted to USD 3.1 bn in January-November, matched by a net inflow of USD 4.0 bn on the financial account balance. The balance of payment was positive at USD 987 mn in 11M2016.
  • Agricultural production increased by 2.9% y/y in 2016. Ukraine recorded a historically high grain yield of 4.4 tons/ha, bringing a gross grain harvest of 64 mn of tons. Ukraine’s foreign Agricultural trade volume amounted to USD 15.3 bn in ten months of 2016, increasing by 3.6% y/y.
  • On December, 29, 2016, the Ukrainian Prime Minister Volodymyr Groysman presented the medium-term strategy of the Government up to the year 2020. The government singled out economic growth, efficient governance, human capital development, judicial equity and fight against corruption, security and defense as its top priorities over the period.
  • On December 30, 2016, Naftogaz signed with Citi and Deutsche Bank a Euro-denominated revolving credit facility for gas purchase in the equivalent of USD 500 mn.

 

Eurobonds overview

The avg. prices on the sovereign Eurobonds increased by 1.5 cents last week. Ukraine-2019 traded at an avg. 98.2 cents; Ukraine-2020 at 96.2 cents, Ukraine-2021 and Ukraine-2022 at an avg. 94.7 cents, Ukraine-2023 and Ukraine-2024 in the range of 92.4 cents; Ukraine-2025, Ukraine-2026 and Ukraine-2027 traded at an avg. 91.0 cents. The sovereign Eurobonds may have benefitted from the strong messages from the visiting US senators to Kyiv, on background of the latest supporting decisions from the outgoing Obama Administration to the country. All our corporate Eurobond picks lost in prices last week. DTEK-18 and Ukrainian Railway-21 lost 5.4 pp. on avg, whereas Ferrexpo-19, Ukralndfarming-18 and Avangard-18 lost 25 bps. The price retreat comes as an adjustment from the price gains of the previous week. Additionally, the decline in DTEK-18 and Railway-21 marked the completion of the Eurobond restructuring scheduled by week end.

Money markets

Over the last week, the average USD/UAH exchange rate increased by 1.5% w/w to 26.78, closing at the level of UAH 27.19 on Thursday. The average daily FX turnover on the interbank market decreased by 14.0% w/w to USD 134.4 mn, while FX trading volume amounted to USD 169.6 mn on Thursday. The average outstanding amounts held on banks’ correspondent accounts decreased by 3.6% w/w or by UAH 1.9 bn to UAH 50.3 bn. Last week, the short-term Kievprime Overnight (o/n) lost 23 bps to be quoted at 13%; Kievprime 1W gained 23 bps to be quoted at 14.7%; Kievprime 2M remained unchanged at 18%. The remaining Kievprime indexes gained 7 bps on avg.: Kievprime 1M was quoted at 16.5%, Kievprime 3M at 18.1%, Kievprime 6M at 18.7%, and Kievprime 1Y at 18.9%. NBU extended UAH 588 mn refinancing to banks during the week (UAH 566 mn for the previous week), whereas banks acquired NBU deposit certificates worth UAH 118.7 bn (UAH 76.7 bn during the previous week).

Local bond markets

The Finance Ministry made no placement of domestic bonds last week. NBU and local banks increased their holdings of gov. domestic bonds by 7.2% w/w (+UAH 2.6 bn) and 11.3% w/w (+UAH 19.3 bn) last week, whereas non-bank corporates and non-resident players increased their holdings by 1.0% w/w (+UAH 148.5 mn) and 1.7% w/w (+UAH 108.4 mn). Secondary market activities for gov. bonds were distributed as follows: short-term bonds accounted for 16% of contracts and 24% of market volume, medium-term bonds made 84% and 76% correspondingly. USD denominated bonds represented 17% of contracts and 1% of the overall market volume. The total turnover of local govt. bonds on the “Perspectiva” SE amounted to UAH 5.3 bn, compared with UAH 5.1 bn for the previous week.

Corporate news

  • Fitch Ratings downgrades Privatbank’s Foreign Currency IDRs to ‘RD’
  • Metinvest launches consent solicitation on its Eurobonds