Ukraine Fixed Income Weekly (February 22, 2016)

Eurobonds overview

Most Ukraine’s Eurobonds’ prices remained unchanged last week, save the Ukraine-24, Ukraine-25, and Ukraine-27, which lost 0.2 cents on average to be traded at 86.7 cents, 87.3 cents, and 85.3 cents respectively. Ukraine-19 traded at 91.8 cents, Ukraine-20 at 90.8 cents, Ukraine-21 at 89.8 cents, Ukraine-22 at 89.0 cents, Ukraine-23 at 88.0 cents, and Ukraine-26 at 85.8 cents. The failure of the no-confidence vote to the Government, the adoption of several laws that brings the country in line with the commitments under the EU integration and visa-free agreement, the adoption of some laws in the framework of the cooperation with the IMF, on background of further turbulences on the local currency market, and a manifested interest of the G-7 countries in maintaining stability and continuity in the country generated an environment with multiple ramifications, restraining the Eurobond market price movements.

The prices of most of our top picks remained unchanged last week, save the  Ukrlandfarming-18, which lost 3 points. Privatbank’s issues were most likely driven by the uncertainties generated by the NBU changing policy, while Ukrlandfarming-18 might have been dragged by the negative news about the lawsuits against the company’s main shareholder Oleg Bakhmatyuk in connection with the bankruptcy of his banking assets.

Local bond markets

The Finance Ministry placed UAH 599 mn bonds on the domestic market last week. Secondary market activities for gov. bonds were distributed as following: short-term bonds accounted for 1.5% of contracts, medium-term bonds made 98.5% of contracts, and there were no contracts with long-term bonds. NBU sold gov bonds in the volume of UAH 1.5 bn (-0.4% w/w), whereas  local bank, non-bank corporates and non-residents acquired UAH 590 mn (+0.5% w/w), UAH 133.1 mn (+1.2% w/w), and UAH 332.2 mn (+1.4% w/w) gov bonds respectively. The total turnover of local govt. bonds on the “Perspectiva” SE amounted to UAH 2.8 bn compared with UAH 2.5 bn for the previous week.

Money markets

Over the last week, the average USD/UAH exchange rate increased by 3.0% w/w and stood at UAH 26.8, closing at the level of UAH 26.9 on Friday. The average daily FX turnover on the interbank market decreased by 0.9% w/w to USD 245.8 mn, while FX trading volume amounted to USD 222.7 mn on Friday. The average outstanding amounts held on banks’ correspondent accounts increased by 16.8% w/w or by UAH 5.8 bn to UAH 40.6 bn. 

Over the last week, the short-term Kievprime Overnight (o/n), Kieprime 1W, and Kievprime 1M mostly remained unchanged and were quoted at 19.1%, 20.2%, and 22.2% correspondingly. The longer-term indexes lost 0.4% on average, with the Kievprime 2M quoted at 23.1%, Kievprime 3M at 23.3%, Kievprime 6M at 23.5%, and Kievprime 1Y at 23.8%.

NBU extended UAH 965 mn refinancing to banks during the week, whereas banks acquired NBU deposit certificates worth UAH 66.6 bn compared with UAH 69.8 bn for the previous week.

Macro & politics update

  • The Ukrainian government survived a no-confidence vote of the Parliament, despite demands from President Petro Poroshenko and some of its own allies in the pro-Western coalition that it should resign 
  • The United States called on Ukraine’s leaders to honor the memory of the Maidan by working together, accelerating reform, fulfilling the conditions of Ukraine’s IMF program, rooting out corruption, and ending the oligarchic grip on politics and the economy. 
  • Russia said it filed a lawsuit against Ukraine in the High Court in London after the government in Kyiv defaulted on USD 3 bn in bonds 
  • Ukraine’s real GDP declined by 1.2% y/y in 4Q2015 according to the preliminary estimates of the State Statistics Service. The seasonally-adjusted GDP rose by 1.5% q/q compared to Q3 2015
  • The Ukrainian Parliament adopted the amendments to Ukraine’s legislative acts regulating the management of state-owned companies, transferring their management to supervisory councils, and independent management boards, in line with the OECD standards 

Corporate news

  • Ukrainian Railways secured creditor’s approval to the restructuring of its USD 500 mn Eurobonds