Ukraine Fixed Income Weekly (October 26, 2015)

Eurobonds overview

Ukraine’s Eurobonds prices remained nearly unchanged last week. Ukraine-15, Ukraine-20, and Ukraine-21 remained unchanged at 82.7 cents, 81.2 cents, and 78.8 cents. Ukraine-17 and Ukraine-23 gained 0.4 cents on average and were traded at 78.9 cents and 79.1 cents. Ukraine-16 and Ukraine-22 lost 0.4 cents on average and were traded at 78.5 cents and 79.2 cents respectively. In our view, while benefiting from the upward review of the country’s ratings by rating agencies following the completion of the debt restructuring operation, Ukraine’s Eurobond prices were still waiting for the finalization of the notes’ exchange. Additionally, the local elections of October 25 might have frozen the market, in expectations of the electoral results and their effect on the country’s policy.


Among our top picks, Avangard-15 and the Privatbank’s issues remained unchanged, whereas Urklandfarming-18 gained 0.5 points. In our view, the market was expecting the imminent London Court decision on the restructuring operation of the Privatbank-2016, and the nine-month interim financial results of the bank. Ukrlandfarming-18 gained support from the approval of Avangard’s restructuring proposal on its USD 200 mn Eurobonds due October 2015, and some positive news about the company’s expansion plans.


Local bond markets

The Finance Ministry made no placement on the domestic market last week. Secondary market activities for govt. bonds were distributed as following: short-term bonds made 56% of contracts, medium-term bonds represented 44%, and there were no deals with long-term bonds. NBU and local non-bank corporates made insignificant operations with government bonds, whereas local banks and non-residents players purchased UAH 1.1 bn (+1.4% w/w) and UAH 483.2 mn (+2.2% w/w) respectively. The total turnover of local govt. bonds on the “Perspectiva” SE amounted to UAH  557 mn compared with UAH 567 mn for the previous week.


Money markets

Over the last week, the average USD/UAH exchange rate increased by 2.4% w/w and stood at UAH 22.2, closing at the level of UAH 22.6 on Friday. The average daily FX turnover on the interbank market decreased by 0.6% w/w to USD 317.5 mn, while FX trading volumes amounted to USD 292.7 mn on Friday. The average outstanding amounts held on banks’ correspondent accounts increased by 8.4% w/w or by UAH 2.0 bn to UAH 25.4 bn. 

All Kievprime Indexes lost 0.4% on average last week. The short-term Kievprime overnight (o/n) and  Kievprime 1W lost 0.3% and were quoted at 18.5% and 19.6% respectively. The Kievprime 1M, Kievprime 2M, and Kievprime 3M lost 0.5% on average and were quoted at 22.8%, 23.8% and 23.9%. The Kievprime 6M lost 0.5% to be quoted at 24%, while the Kievprime 1Y remained unchanged at 24.4%. 

NBU extended no refinancing to banks during the week, whereas banks acquired NBU deposit certificates worth UAH 73.2 bn compared with UAH 50.5 bn for the previous week.


Macro & politics update

• On October 19, 2015, S&P raised its long- and short-term foreign currency sovereign credit ratings on Ukraine to 'B-/B' from 'SD/D' (selective default) on completion of the country’s distressed debt exchange on October 14, 2015. The rating agency expects to assign an issue rating of 'B-' to the newly issued bonds from the country’s debt exchange.

• Fitch sees the Viability Ratings assigned to Ukraine's banks to stand mostly in the 'ccc' level for the foreseeable future, indicating substantial credit risk and likelihood of default, despite signs of improvement in the operating environment. 

• On October 22, 2015, NBU revised some of the FX restrictions, stipulated by its earlier resolutions in order to stimulate foreign exchange inflows into the country and its banking sector. The resolution entered into force on October 23, 2015.

• Industrial production increased by 5.9% m/m in September, 2015. Manufacturing increased by 10.7% m/m, mining by 0.6% m/m, energy generation and distribution contracted by 4.2% m/m.

• Ukraine will switch to the international ISO standard in 2016, according to a draft resolution of the Scientific and technical council in charge of technical regulation in the Economy Ministry of Ukraine.


Corporate news

• The Government registered the newly-founded JSC Ukrainian Railway

• PrivatBank disclosed its financial statement for 3Q2015

• S&P dowgrades Ferrexpo to ‘CCC’ from ‘CCC+’

• MHP’s poultry production up 4% y/y, sales up 3% y/y in 9M2015