Ukraine Fixed Income Weekly (February 16-20, 2015)

Eurobonds overview

Last week prices of the Ukrainian sovereign Eurobonds experienced a sharp decline. The prices of long-term Eurobonds (Ukraine-21, Ukraine-22, and Ukraine-23) decreased by 8.5-8.6 points. The price of short-term Ukraine-15 fell by 10 points, while the price of Ukraine-16 and Ukraine-17 rose by 5.6 and 8.5 points respectively. The major reason for the sharp fell of prices was the continuation of military actions by pro-Russian terrorists at the Eastern regions of Ukraine despite the ceasefire agreement and Ukraine’s intention to appeal to the United Nations and the European Union on the deployment of a peacekeeping and security mission in Ukraine.

Among our top picks, the prices of Ukreximbank-16 and Ukreximbank-18 decreased by 7 and 8 points respectively, while indications on Avangard-15, Ukrlandfarming-18 and Ukrainian Railways-18 improved slightly by 1.3-2.6 points. The prices of Privatbank-16 and Privatbank-18 remained unchanged.

Macro & politics

After the signing of the Minsk agreement the pro-Russian forces have intensified their attacks in the directions of Mariupol and Debaltsevo. The Ukrainian troops withdrew from Debaltsevo.

The National Security and Defense Council of Ukraine supported the decision to appeal to the United Nations and the European Union on the deployment of a peacekeeping and security mission in Ukraine.

The project of changes to the state budget for 2015, agreed with the IMF mission, provides that the deficit would increase by 19.8% to UAH 76.3 bn or to 4.1% of GDP (without consideration of the state-owned company Naftogaz).

According to the official economic forecast, real GDP in 2015 would fall by 5.5%, consumer price index in 2015 would reach 126.7 y/y. GDP in 4Q2014, reported by the State Statistics Service, fell 15.2% y/y (without consideration of Crimea territory and regions under ATO).

Industrial production in Ukraine in January-2015 declined by 21.3% y/y and 19.7% m/m.

In 2014, foreign direct investments to Ukraine reached USD 2.45 bn, down by 56.8% from 2013.

 

Local bond markets

Last week the Ministry of Finance held two primary market auctions on 1-month USD-denominated local bonds and an auction on 2-year and 5-year UAH-denominated local government bonds. On both auctions 1-month bonds were sold with 8.75% coupon rate (earlier this year  1.5-month USD-denominated local bonds were sold with the same coupon), and the government attracted USD 100 mn on February 17 and USD 40 mn on February 18. No bids were received for 2– and 5-year local bonds.

At the next scheduled auction on February 24, the Ministry of Finance is going to sell 2-year and 5-year UAH-denominated local government bonds together with 12-month USD-denominated local bonds.

 

Money markets

During the last week the official USD/UAH exchange rate on the interbank market continued upward movement, rising by 7.5% to the level of 27.86. Average FX turnover on the interbank market declined by 10%, and the daily volume of sales on Friday constituted the equivalent of USD 235.6 mn.

Average outstanding amounts held on banks’ correspondent accounts last week rose by UAH 2.6 mn or 9.2% to UAH 31.0 bn. Kievprime overnight (o/n) increased by 225 bps to 17.25%, Kievprime 1W rose by 100 bps to 19.00%, Kievprime 1M grew up by 50 bps to 22.50%, Kievprime 3M as well as Kievprime 6M together with Kievprime 1Y rose by 221 bps to 21.88%.

The NBU provided refinancing to the banks in the amount of UAH 11.6 bn.

 

Corporate news

  • Privatbank increased its share capital by 5.5%
  • Fitch downgraded Ukrainian Railway’s long-term foreign currency issuer default rating to “CC”

 

Disclaimer

Although the information in this report has been obtained from sources which Empire State Capital Partners believes to be reliable and was collected in good faith, we do not represent or warrant its accuracy, except with respect to information concerning Empire State Capital Partners, its subsidiaries and affiliates, either expressly or implied, and such information may be incomplete or condensed. Nor has the information and/or data been independently verified, and so is provided without further caveat regarding its reliability, suitability for commerce or specific purpose. 

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