Ukraine Fixed Income Weekly (December 14, 2015)

Eurobonds overview

 All Ukraine’s Eurobond lost in price on average 0.4 cents last week, save the long-term Ukraine-26 and Ukraine-27 which lost 1.3 cents on average and were traded at 89.0 cents. The short-term Ukraine-19, Ukraine-20, and Ukraine-21 traded at an average 93.9 cents, whereas the medium-term  Ukraine-22, Ukraine-23, Ukraine-24, and Ukraine-25 traded at an average 90.8 cents. Notwithstanding the supportive effect of the IMF decision to change its lending rule virtually in favor of Ukraine,  together with the news about creditors’ support to the restructuring of the Kiev City Eurobonds, the uncertainties about the disbursement of the next IMF credit tranche to the country, on background of increasing risks of political instability in connection with the discussions about tax reforms, 2016 state budget, and threat of no-confidence vote to the government have restrained the Eurobond price development.

 Our top picks gained in prices last week, save the Ukrlandfarming-18. Privatbank-18 gained 4 points, Avangard-18 gained 5 points, whereas Privatbank-21 basically remained unchanged. Ukrlandfarming-18 incurred a minor lost of 0.6 points. 

 

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 34% of contracts, medium-term bonds made 66% of contracts, and no operations with long-term bonds were recorded. Non-resident players acquired domestic gov. bonds worth UAH 74 mn (+0.3% w/w), whereas NBU, local banks, and local non-bank corporates sold UAH 49 mn (insignificant change), UAH 2.1 bn (-2.6% w/w), and UAH 153 mn (-0.7% w/w) respectively. The total turnover of local govt. bonds on the “Perspectiva” SE amounted to UAH 1.4 bn compared with UAH  1.0 bn for the previous week.

 

Money markets

 Over the last week, the average USD/UAH exchange rate decreased by 1.4% w/w and stood at UAH 23.3, closing at the level of UAH 23.9 on Friday. The average daily FX turnover on the interbank market decreased by 12.5% w/w to USD 270.2 mn, while FX trading volumes amounted to USD  244.9 mn on Friday. The average outstanding amounts held on banks’ correspondent accounts decreased by 0.8% w/w or by UAH 202.7 mn to UAH 25.8 bn. 

Over the last week, all Kievprime indexes, save the short-term Kievprime overnight (o/n) and Kievprime 1W lost 0.4% on average. Kievprime o/n and Kievprime 1W gained 0.1% on average and were quoted at 19.1% and 20.2% respectively.  Kievprime 1M was quoted at 22.3%, whereas Kievprime 2M, Kievprime 3M, Kievprime 6M, and Kievprime 1Y were quoted at 23.7% on average.

NBU extended UAH 200.1 mn refinancing to banks during the week, whereas banks acquired NBU deposit certificates worth UAH 56.6 bn compared with UAH 61.8 bn for the previous week.

 

Macro & politics update

  • The International Monetary Fund has agreed to change its policy on lending to countries that are in arrears to other governments. The change allows the Fund to keep supporting countries if they fail to repay official creditors, a move that would help Ukraine if it misses payments on a USD 3 bn debt to Russia.
  • Consumer prices grew by 2% m/m in November 2015. Year to date, consumer prices grew by 42.3% in January-November 2015. 
  • Ukraine’s money base aggregate increased by 0.9% m/m (-3.6% ytd) and amounted to UAH 321.2 bn as of end-November. Off-bank cash decreased by 0.6% m/m (-3.4% ytd). Money stock (M3) increased by 1.0% m/m (-1.3% ytd) thanks to an increase in outstanding deposits in national currency by 0.6% m/m.
  • On December 10, 2015, the Ukrainian Parliament has adopted the new edition of the Law on Public Service.  
  • On December 12, 2015, Standard & Poor's Ratings Services affirmed Ukraine’s long-and short-term local and foreign sovereign credit ratings at 'B-/B'.

 

Corporate news

  • Holders of Kyiv city’s Eurobonds due 2016 agree to the restructuring offer; tender period extended for the 2015 Notes due to low participation
  • Ukrzaliznytsia reached a preliminary debt restructuring agreement with Ad Hoc Committee of Creditors, reported UAH 4.7 bn of losses in 1H2015
  • Metinvest’s revenue down 36% y/y, EBITDA down 63% y/y in 9M2015
  • S&P upgrades Privatbank’s rating to ‘B-/C’ from ‘SD’