Ukraine Fixed Income Weekly (December 21, 2015)

Eurobonds overview

All Ukraine’s Eurobond lost on average 1.4 cents on average in price  last week, save the Ukraine-22 which incurred a minor lost of 0.4 cents. Ukraine-19 was traded at 93.6 cents; Ukraine-20, Ukraine-21, Ukraine-22 in the range of 92 cents; Ukraine-23, Ukraine-24, Ukraine-25 at 89.0 cents on average; and Ukraine-26 and Ukraine-27 were traded at 87.5 cents on average. The Eurobond prices were slightly depressed by the negative news about the ongoing discussions concerning the 2016 budget and tax reforms, which prompted a warning from the IMF as to the outlook of the financial assistance to the country from the side of the international financial institutions. At the same time, the IMF classification of the country’s debt to Russia as an official one has also raised concerns that the country might be obliged to repay the debt.

Our top picks demonstrated no price changes last week, save the Ukrlandfarming-18, which lost 0.4 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 76% of contracts, medium-term bonds made 24% of contracts, and no operations with long-term bonds were recorded. The NBU and local non-bank corporates increased their holding of domestic gov. bonds by UAH 627 mn (+0.2% w/w) and UAH 186 mn (+0.9% w/w) respectively, whereas local banks and non-residents players reduced their holdings by UAH 408 mn (-0.5% w/w) and UAH 111 mn (-0.5% w/w) respectively. The total turnover of local govt. bonds on the “Perspectiva” SE amounted to UAH 4.5 bn compared with UAH 1.4 bn for the previous week.

 

Money markets

Over the last week, the average USD/UAH exchange rate increased by 1.1% w/w and stood at UAH 23.6, closing at the level of UAH 23.5 on Friday. The average daily FX turnover on the interbank market increased by 14.2% w/w to USD 308.6 mn, while FX trading volumes amounted to USD  291.8 mn on Friday. The average outstanding amounts held on banks’ correspondent accounts increased by 26.6% w/w or by UAH 6.6 bn to UAH 32.4 bn. 

Over the last week, most Kievprime indexes, save the shortest and the longest ones, gained 0.1% on average. The short-term Kievprime overnight (o/n) lost 0.2% and was quoted at 18.9%, whereas Kievprime 1W remained unchanged at 20.2%. The longest Kievprime 1Y gained 3% and was quoted  at 24.2%. The Kievprime 1M, Kievprime 2M, Kievprime 3M, Kievprime 6M gained 0.1% and were quoted at 22.3%, 23.5%, 23.7%, and 23.9% correspondingly. NBU extended UAH 200.1 mn refinancing to banks during the week, whereas banks acquired NBU deposit certificates worth UAH 65.9 bn compared with UAH 56.6 bn for the previous week.

 

Macro & politics update

  •  Ukraine’s GDP fell by 7.2% y/y in 3Q2015, redressing from a 14.6% y/y and a 17.2% y/y downfall in 2Q2015 and 1Q2015.
  • On December 16, 2015, the IMF Executive Board decided that Ukraine’s US$3 billion Eurobond held by Russia’s National Wealth Fund (NWF) is an official claim for the purposes of the Fund’s policy on arrears to official bilateral creditors. 
  • The IMF warns Ukraine about the risks of disruption in the international financing to the country in case of approval of a budget that deviates from program objectives for 2016 and the medium-term.
  • On December 16, 2015, the Russian Federation President Vladimir Putin signed a decree suspending Russia's free-trade agreement with Ukraine as of January 1, 2016.
  • The Parliamentary Committee for tax and customs policy has recommended preparing the 2016 state budget on the ground of the current tax basis, and starting systemic work upon the new tax code over the year so as to allow introducing it in 2017 . 
  • The cumulative balance of Ukraine’s foreign trade in goods was positive at USD 381 mn in 10M2015. Goods exports amounted to USD 31.3 bn declining by 31.8% y/y, whereas imports totaled USD 30.9 bn dropping by 32.2% y/y.

 

Corporate news

  • Ukraine introduces a moratorium on sovereign and quasi-sovereign debt repayment to the Russian Federation
  • Fitch considers Ukrzaliznytsia’s debt restructuring offer to be a distressed debt exchange