Ukraine Fixed Income Weekly (November 23, 2015)

Eurobonds overview

All Ukraine’s Eurobond prices gained 2.5 cents on average last week, save the Ukraine-20, and the Ukraine-25, which gained 1.1 cents and 0.3 cents to be traded at 96.5 cents and 95.4 cents respectively. Ukraine-21 and Ukraine-22 traded at an average 96.2 cents, Ukraine-23 and Ukraine-25 at an average of 95.5 cents, Ukraine-24, Ukraine-26, and Ukraine-27 traded at an average 94.5 cents. Ukraine-19 gained 15.3 cents to be traded at 97.8 cents. The price rally have been dictated by insufficient market offer for the new bonds at this time, in our view.

 Among our top picks, Ukrlandfarming-18 gained one point, whereas the other picks (Privatbank-21, Privatbank-18, Avangard-18) remained unchanged. Privatbank’s issues were kept on hold in our view in connection with the  ongoing exchange of the notes.  Ukrlandfarming most likely continued gaining from improving expectations as to the long-term outlook of the company, nurtured by the news about the company’s investment plans.

 

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 accounted for 42% of contracts, medium-term bonds made 58% of contracts, and there were no deals with long-term bonds. NBU sold UAH 1.9 bn gov (-0.5% w/w) domestic bonds, local banks acquired UAH 1.7 bn (+2.1% w/w), local non-bank corporates and non-residents acquired UAH 90.3 mn (+0.4% w/w), and UAH 826.3 mn ( +3.8% w/w) respectively. The total turnover of local govt. bonds on the “Perspectiva” SE amounted to UAH 915 mn compared with UAH  2.7 bn for the previous week.

 

Money markets

Over the last week, the average USD/UAH exchange rate increased by 3.9% w/w and stood at UAH 23.7, closing at the level of UAH 24.0 on Friday. The average daily FX turnover on the interbank market decreased by 13.7% w/w to USD 246.9 mn, while FX trading volumes amounted to USD  250.6 mn on Friday. The average outstanding amounts held on banks’ correspondent accounts increased by 23.0% w/w or by UAH 5.2 bn to UAH 28.0 bn.

Over the last week, the short-term Kievprime overnight (o/n) and Kievprime 1W lost 0.4% on average and were quoted at 19.0% and 20.1% respectively.  Kievprime 2M and Kievprime 3M lost 0.1% and were quoted at 23.5% on average. Kievprime 1M, Kievprime 6M, and Kievprime 1Y mostly remained unchanged at 22.4%, 23.9%, and 24.4% respectively.

NBU extended no refinancing to banks during the week, whereas banks acquired NBU deposit certificates worth UAH 62.1 bn compared with UAH 55.5 bn for the previous week.

 

Macro & politics update

  • On November 18, 2015, Fitch Ratings upgraded Ukraine's Long-term foreign currency Issuer Default Rating (IDR) to 'CCC' from 'RD' (Restricted Default). The Short-term foreign-currency IDR is upgraded to 'C' from 'RD'. The Country Ceiling is affirmed at 'CCC'. Fitch assigned 'CCC' ratings to the Eurobonds issued on November 12, 2015.
  • On November 19, 2015, Moody's Investors Service upgraded Ukraine's government issuer rating to Caa3 from Ca, rating outlook stable . The nine new bonds issued in exchange of the country’s 13 Eurobonds issues were rated Caa3. Moody's raised the country ceiling for foreign currency bonds to Caa2 from Caa3.
  • Moscow proposed Kyiv to repay USD 1 bn of its USD 3 bn debt each year from 2016 to 2018, and be freed from all payments this year. 
  • Ukraine’s GDP fell by 7% y/y, increased by 0.7% q/q (seasonally adjusted) in 3Q2015.
  • Industrial production grew by 7.3% m/m (-5% y/y) in October. Mining output increased by 2.8%% m/m (+1.9% y/y), manufacturing by 6.8% m/m (-7.5% y/y), and energy generation by 20.5% m/m (-4.9% y/y).

 

Corporate news

  • MHP’s revenue down 13% y/y, EBITDA down 15% y/y in 9M2015
  • DTEK’s electricity generation down by 21% y/y in 9M2015
  • Metinvest reported a net loss of USD 166 mn in 1H2015