Ukraine Fixed Income Weekly (February 9-13, 2015)

Eurobonds overview

Last week prices of the Ukrainian sovereign Eurobonds experienced a moderate growth. 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 grew up by 6 points, while the price of Ukraine-16 and Ukraine-17 rose by 2 and 4 points respectively. The major reason for this was the progress in the ongoing negotiations between the Ukrainian government and the IMF mission on the extended fund facility program and the successful conclusion of the Minsk talks on the new ceasefire in Eastern Ukraine.

Among our top picks, the prices of Ukreximbank-16 and Ukreximbank-18 increased by 4 and 2.5 points respectively, while indications on Avangard-15, Ukrlandfarming-18 and Ukrainian Railways-18 improved slightly by 1-2 points. The prices of Privatbank-16 and Privatbank-18 declined by 4 and 3 points respectively.


Macro & politics

The IMF mission has reached a staff-level agreement with the Ukrainian government on a new economic reform program that would be supported by an Extended Fund Facility (EFF) of USD 17.5 bn from the IMF, as well as by additional resources from the international community (Ukraine could receive as much as USD 40 bn over the 4-year period).

Fitch Ratings has downgraded Ukraine's long-term foreign currency issuer default rating (IDR) to 'CC' from 'CCC' and affirmed its local currency IDR at 'CCC'. The downgrade of Ukraine's long-term rating indicates that a default of some kind appears probable.

After Minsk negotiations the leaders of Ukraine, France, Germany and Russia have agreed on a new ceasefire in Eastern Ukraine starting from February 15, 2015. The key terms include the withdrawal of foreign troops from Ukraine by the end of 2015, the release of all hostages from both sides and the withdrawal of heavy artillery from the frontlines.

During the last week the Ukrainian parliament passed several bills related to deregulation, anti-corruption reform and transparency in the public sector.


Local bond markets

Last week the Ministry of Finance held two primary market auctions on 2-year and 5-year UAH-denominated local government bonds, but received no bids at all.

At the next scheduled auction on February 10, the Ministry of Finance is going to sell similar 2-year and 5-year UAH-denominated local government bonds.


Money markets

During the last week the official USD/UAH exchange rate on the interbank market continued upward movement, rising by 12.1% to the level of 25.92. 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 244 mn or 0.8% to UAH 29.6 bn. Kievprime overnight (o/n) increased by 80 bps to 15.00%, Kievprime 1W rose by 260 bps to 18.00%, Kievprime 1M grew up by 140 bps to 22.00%, Kievprime 3M as well as Kievprime 6M slightly rose by 7 bps to 19.67%. At the same time Kievprime 1Y increased by 27 bps to 19.67%.

The NBU provided refinancing to the banks in the amount of UAH 7.4 bn.


Corporate news

• Moody’s downgraded DTEK to ‘Caa3’ from ‘Caa2’, outlook negative



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