Ukraine Fixed Income Weekly (February 2-6, 2015)

Eurobonds overview

Last week prices of the Ukrainian sovereign Eurobonds were mostly flat. The prices of long-term Eurobonds (Ukraine-21, Ukraine-22, and Ukraine-23) slightly increased by 1-2 points. The price of short-term Ukraine-15 didn’t change, while the price of Ukraine-16 rose by 7 points. The major reason for this was the promises of the Ukrainian officials to receive a positive result in co-operation with the technical mission of the IMF on the extended loan facility program and start of negotiations on the peaceful settlement of the military clashes in Eastern Ukraine.

Among our top picks, the prices of Ukrainian Railways-18, Oschadbank-16, Oschadbank-18, Ukreximbank-18 increased by 1.5-3 points. Besides this, the prices of Avangard-15 and Ukrlandfarming-18 declined by 1.1-3.1 points.


Macro & politics

The deficit of balance of payments reached USD 13.3 bn in 2014. The  current account deficit amounted to USD 5.2 bn, while the deficit of the financial and capital accounts was USD 8.1 bn.

Ukraine’s international reserves declined by USD 1.1 bn or 17% m/m to USD 6.4 bn in January due to payments for natural gas and repayment of the government and guaranteed debt.

CPI reached 28.5% y/y in January. All major categories of consumer goods (except vegetables) reported an increase in prices y/y.

The NBU abandoned the indicative exchange rate, which led to a rapid growth of the interbank USD/UAH rates to 22-25, matching the unofficial “market” rates. Moreover, the NBU increased the base lending rate to 19.5% from 14% to limit the UAH liquidity and curb inflation.

Merkel and Hollande visited Kyiv on Thursday presenting a new peace plan to Poroshenko, before leaving to Moscow to discuss it with Putin. The European leaders met with Biden and Poroshenko in Munich on Sunday, where they called for an immediate ceasefire in Eastern Ukraine. So far no details on the possible peace plan were published.


Local bond markets

Last week the Ministry of Finance held two primary market auctions on 1.5-month USD-denominated, 2-year and 5-year UAH-denominated local government bonds. On Tuesday, February 3, the government attracted USD 60.7 mn and UAH 23.7 mn, and on February 5 additional USD 100 mn were attracted by the MoF. Yields reached 8.75% for 1.5-month USD-denominated bonds, and 16.7% for 2-year UAH-denominated bonds.


Money markets

During the last week the official USD/UAH exchange rate on the interbank market plummeted by 43.2% to the level of 23.13 as the NBU abandoned the indicative exchange rate. Average FX turnover on the interbank market declined by 30%, and the daily volume of sales on Friday constituted the equivalent of USD 192.8 mn.

Outstanding amounts held on banks’ correspondent accounts last week declined by UAH 1.5 bn or 4.8% to UAH 29.8 bn. Kievprime overnight (o/n) increased by 237 bps to 14.20%, Kievprime 1W rose by 193 bps to 15.40%, Kievprime 1M grew up by 193 bps to 20.60%, Kievprime 3M as well as Kievprime 6M rose by 27 bps to 19.60%. At the same time Kievprime 1Y slightly increased only by 7 bps to 19.40%.


Corporate news

  • Ferrexpo published the new terms of exchange offer
  • Metinvest stops Enakievo MP due to complicated railway communication and fighting in the area



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