Ukraine Fixed Income Weekly (October 12, 2015)

Eurobonds overview

Last week Ukrainian Eurobonds prices remained nearly  unchanged. Ukraine-15 traded at 82.8 cents, Ukraine-20 at 81.3 cents, Ukraine-21 at 79.0 cents, and Ukraine-23 at 80.5 cents. Ukraine-16 gained 0.1 cent and traded at 79.0 cents, whereas Ukraine-17 lost 0.5 cent to trade at 79.0 cents. Ukraine-22 gained 0.3 cents and traded at 79.8 cents. In our view, Ukraine’s Eurobonds are now overpriced, with price volatility going down as investors are waiting for the wrap-up of the debt operation.

 Among our top picks, Avangard-15 gained 1 points, Urklandfarming-18 gained 0.5 points, Privatbank-18 remained unchanged, whereas Privatbank-15 lost 0.8 points. In our view, the gains of Avangard and Ukrlandfarming reflected a moderate response of the market to the restructuring offer of Avangard, on background of Ukrlandfarming’s plan to build a grain-handling terminal at the Yuzhny port of Odessa. In the meantime, the prices of Privatbank’s issues still reflect indecision as to the debt restructuring plan of the bank.

Local bond markets

The Finance Ministry made no placement on the domestic market last week. Secondary market activities for gov. bonds were distributed as following: short-term bonds made 51% of contracts, medium-term bonds represented 49%, and there were no deals with long-term bonds. NBU and local non-bank corporates sold UAH 100 mn (-0.1%) and UAH 245 mn (-1.2%) respectively. Local banks and non-residents corporates acquired UAH 560 mn (+0.7% w/w) and UAH 96 mn (+0.5% w/w). The total turnover of local govt. bonds on the “Perspectiva” SE amounted to UAH  420 mn compared with UAH 3.2 bn for the previous week.

Money markets

Over the last week, the average USD/UAH exchange rate decreased by 0.2% w/w and stood at UAH 21.3, closing at the level of UAH 21.5 on Friday. The average daily FX turnover on the interbank market decreased by 4.6% w/w to USD 298.7 mn, while FX trading volumes amounted to USD 312.1 mn on Friday. The average outstanding amounts held on banks’ correspondent accounts decreased by 13% w/w or by UAH 3.4 bn to UAH 22.4 bn. 

All Kievprime Indexes declined last week. The short-term Kievprime overnight (o/n) and  Kievprime 1W lost 0.2% and were quoted at 18.6% and 19.6% respectively. Kievprime 1M lost 0.4% to be quoted at 22.5%. Kievprime 2M, Kievprime 3M, and Kievprime 6M lost 0.9% on average to be quoted at 24%, and Kievprime 1Y lost 0.5% to be quoted at 24.5%. 

NBU extended no refinancing to banks during the week, whereas banks acquired NBU deposit certificates worth UAH 68.2 bn, compared with UAH 58.3 bn for the previous week.

Macro & politics update

  • A minority group of investors (holders of 2015 and 2016 Ukraine Eurobonds) which demanded better debt restructuring terms said they approve the recent changes in the sovereign debt exchange offer and will vote in favor of the deal at the forthcoming bondholder meeting.
  • On October 6, 2015, Fitch Ratings downgraded the Long-term foreign currency and the Short-term foreign currency IDR of Ukraine to 'RD' (Restricted Default) from 'C'. The Senior unsecured foreign-currency issue ratings on all outstanding domestic issues, and the Country Ceiling were affirmed at 'CCC'.  The senior unsecured foreign-currency issue ratings on all outstanding external issues are affirmed at 'C'. 
  • Ukraine’s Foreign Reserves increased by 1.24% m/m to 
  • USD 12.8 bn in September. Support to the country’s reserves came from international and bilateral sources, as well as from currency swaps with the Central Banks of other countries.
  • Consumer prices increased by 2.3% m/m in September 2015. Food prices grew by 1.2% m/m, utilities by 2.4% m/m, and durable goods by 0.6% m/m. The price of fuel and lubricants fell by 3.6% m/m. Year-to-Date, consumer prices increased by 41.4%

Corporate news

  • Ferrexpo’s pellet production up 5.1% y/y to 8.7 mln tonnes in 9M2015
  • MHP to increase land bank by 100 kha, export poultry to Saudi Arabia
  • Kyiv introduced a payment moratorium on its 2015 and 2016 Eurobonds