Ukraine Fixed Income Weekly (January 25, 2016)

Eurobonds overview

Ukraine’s Eurobonds’ prices mostly declined last week, with the exception of the short-term Ukraine-19, the long-term Ukraine-24 and Ukraine-25. Ukraine-19 gained 0.4 cents and was traded at 94.5 cents. Ukraine-20 and Ukraine-21 lost 0.2 cents and were traded at 92.7 cents on average. Ukraine-22 and Ukraine-23 lost 0.6 cents to be traded at 91.5 cents on average. Ukraine-24 and Ukraine-25 gained 0.1 cents and were traded at 90.2 cents on average. And Ukraine-26 and Ukraine-27 lost 0.2 cents to be traded at an average 89.3 cents correspondingly.

The price development for the Eurobonds’ prices of Ukrainian issuers must have reflected concerns about the  latest turbulences on the country’s foreign currency market, hardly offset by the mildly positive news about the negotiations of the country with the IMF and Russia, together with the successful placement of foreign currency dominated bonds by the Finance Ministry on the domestic market.

The prices of our top picks remained mostly unchanged last week, save the Ukrlandfarming-18, which has gained 0.1 points. The price development seemed to have reflected a general price decline in Ukrainian corporate bonds last week.

Local bond markets

The Finance Ministry placed USD 487 mn and UAH 101 mn bonds on the domestic market last week. Secondary market activities for gov. bonds were distributed as following: short-term bonds accounted for 9% of contracts, medium-term bonds made 91% of contracts, and there were no contracts with long-term bonds. All market players acquired gov. bonds during the week: NBU acquired gov bonds in the volume of UAH 10 mn (miimal change), UAH 300 mn (+2.8% w/w) for local non-bank corporates, UAH 25 mn for non-residents (+0.1% w/w), and UAH 12.5 bn (+15.2% w/w) for local banks. The total turnover of local govt. bonds on the “Perspectiva” SE amounted to UAH 3.2 bn compared with UAH 708 mn 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 24.6, closing at the level of UAH 24.8 on Friday. The average daily FX turnover on the interbank market increased by 13.0% w/w to USD 245.8 mn, while FX trading volumes amounted to USD  232.1 mn on Friday. The average outstanding amounts held on banks’ correspondent accounts increased by 10.6% w/w or by UAH 4.2 bn to UAH 44.0 bn. 

Over the last week, the short-term Kievprime overnight (o/n) together with Kievprime 2M lost 0.2% on average and were quoted at 18.7% and 23.3% respectively. Kievprime 3M remained unchanged at 23.5%. Kievprime  1W, Kievprime 1M, and Kievprime 6M gained 0.1% on average, and were quoted at 20.1%, 22.3%, and 23.7% correspondingly. Kievprime 1Y gained 0.5% and was quoted at 24.0%.%. 

NBU extended no refinancing to banks during the week, whereas banks acquired NBU deposit certificates worth UAH 80.2 bn compared with UAH 89.5 bn for the previous week.

Macro & politics update

  • On January 19, 2016, the Ministry of Finance attracted USD 487 mn at a rate of 8% on the domestic market through placement of USD-denominated bond, with maturity on July 5, 2017 
  • Ukraine’s Finance Minister Natalie Jaresko said she expected to receive the third IMF credit tranche in February. The Finance Minister discussed with the US Under Secretary of the Treasury for International Affairs Nathan Sheets the next steps to unlock the third USD 1 bn loan guarantee from the USA, and further technical support for the financial sector reform in Ukraine
  • Any out-of-court deal to restructure Ukraine's USD 3 bn debt to Russia must deliver the same economic effect for Kyiv, though its format would likely differ from last year's private sector debt swap, Ukraine's Finance Minister said on the sidelines of the World Economic Forum in Davos. 
  • Industrial production decreased by 2.1% y/y in December of 2015, compared with a 4.9% y/y drop in November. For the entire 2015 year, Industrial production declined by 13.4% y/y, following a 10.1% y/y drop in 2014. Mining output contacted by 14.5% y/y, manufacturing by 13.1% y/y, electricity, gas, steam and air conditioning by 12% y/y.

 Corporate news

  • Metinvest reported a negative USD 4 mn EBITDA, USD 209 mn cash balance in November, 2015
  • UkrLandFarming reported a net loss of USD 165 mn, debt to EBITDA ratio of 6.78 in 9M2015
  • Ukrainian Railways convenes noteholders’ meeting on February 17, 2016