Ukraine Fixed Income Weekly (February 8, 2016)

Eurobonds overview

All Ukraine’s Eurobonds’ prices lost in prices last week. The shortest Ukraine-19 lost 2 cents and traded at 92.5 cents. Ukraine-20, Ukraine-21, Ukraine-22, Ukraine-23 lost 3 cents on average, and were traded at 91.8 cents, 90.0 cents, 89.5 cents, and 89.0 cents correspondingly. Ukraine-24, Ukraine-25, Ukraine-26, and Ukraine-27 lost 3.4 cents on average. Ukraine-24 was traded at 87.9 cents, Ukraine-25 at 88.8 cents, Ukraine-26 and Ukraine-27 at 87.1 cents. The prices of the sovereign’s issues were dragged down by the highly negative news triggered by the resignation of the economy minister, the corruption revelations of the minister, and the following tough reactions from the IMF and the G-7 countries.

Among our top picks the prices of Privatbank-18 and Privatbank-21 remained unchanged, whereas Ukrlandfarming-18 and Avangard-18 lost 12 points and 17 points respectively. The negative price development on Ukrlandfarming-18 and Avangard-18 went against the positive news that Ukrlandfarming and its subsidiary the Avangard company have generated lastly, related to their expansion prospects and to the progress in the negotiations with creditors. Besides the general downward price development on Ukrainian issues, some insider’s information may have driven the move.

Local bond markets

The Finance Ministry placed UAH 472 mn and USD 431 mn bonds on the domestic market last week. Secondary market activities for gov. bonds were distributed as following: short-term bonds accounted for 1% of contracts, medium-term bonds made 99% of contracts, and there were no contracts with long-term bonds. NBU acquired gov bonds in the volume of UAH 22 mn (minimal increase), UAH 679 mn (+6.1% w/w) for local non-bank corporates, UAH 608 mn for non-residents (+2.7% w/w); local banks purchased gov bonds worth UAH 26.4 bn (+30.2% w/w). The total turnover of local govt. bonds on the “Perspectiva” SE amounted to UAH 2.7 bn compared with UAH 1.9 mn for the previous week.

Money markets

Over the last week, the average USD/UAH exchange rate increased by 2.8% w/w and stood at UAH25.8, closing at the level of UAH25.9 on Friday. The average daily FX turnover on the interbank market increased by 12.4% w/w to USD248.7 mn, while FX trading volume amounted to USD283.2 mn on Friday. The average outstanding amounts held on banks’ correspondent accounts decreased by 5.6% w/w or by UAH2.2 bn to UAH37.2 bn. 

Over the last week, the quotations on the short-term kievprime overnight (o/n) and Kievprime 1W, together with Kievprime 2M remained unchanged at 18.8%, 20.0%,and 23.3% respectively. Kievprime 1M, Kievprime 3M, and Kievprime 6M increased by 0.2% on average and were quoted at 22.2%, 23.5%, and 23.6%. Kievprime 1Y gained 0.6% to be quoted at 23.9%.

NBU extended UAH 325 mn refinancing to banks during the week, whereas banks acquired NBU deposit certificates worth UAH 89.3 bn compared with UAH 78.2 bn for the previous week.

Macro & politics update

  • Ukraine’s Economy Minister Aivaras Abromavicius unexpectedly announced his resignation. The Health, Agriculture and Infrastructure, and the Information Ministers, who had previously tendered their resignations, said they would continue to work in the Cabinet, provided they would be allowed to pass reform initiatives without political interference.
  • The representatives of large and medium Ukrainian businesses launched the “Ukrainian Business Initiative”, vowing to refrain from non-transparent financing of politicians, while committing to honestly pay taxes.
  • The National Bank of Ukraine committed Ukrainian banks to gradually increase their charter capital up to UAH 500 mn from June 2016 to July 2024.
  • Ukraine’s current account deficit contracted to USD 204 mn, representing 0.2% of GDP in 2015. The capital account balance was positive at USD 565 mn, whereas the financial account was positive at USD 488 mn.
  • Ukraine’s foreign reserves increased by 1% m/m and amounted to USD 13.4 bn as of February 1, 2016.

Corporate news

  • Privatbank announces UAH 268 mn net profit for 2015
  • UkrLandFarming reached mutual understanding with banks and creditors, prioritizes investment into new transshipment facility
  • Mriya reports a USD 13.6 mn cash balance in 2015
  • MHP’s poultry meat sales up by 2% y/y in 2015