Fixed Income Weekly (November 28, 2016)


Macro & politics update

  • On results of the 18th EU-Ukraine Summit in Brussels on November 24, 2016, the European Commission has confirmed the next components of an overall support package to foster accountable and transparent governance in Ukraine in a total volume of EUR 300 mn
  • Industrial production grew by 0.8% y/y in October, expanding however by 1.6% y/y if taking account of the seasonal factor. Mining output contracted by 1.9% y/y during the month, Manufacturing production increased by 1.3% y/y, Energy generation and distribution grew by 3.7% y/y
  • On November 23, 2016, the Ukrainian government has repelled 367 different regulatory rulings weighing upon businesses


Eurobonds overview

The avg. prices on the sovereign Eurobonds Ukraine-2019, Ukraine-2022, Ukraine-2023, and Ukraine-2025 increased by 0.2 cents last week, whereas Ukraine-2020, Ukraine-2021, and Ukraine-2026 gained 0.7 cents. Meanwhile, Ukraine-2024 and Ukraine-2027 lost 0.8 cents on avg. The short-term Ukraine-2019, Ukraine-2020, and Ukraine-2021 traded at 96.4 cents, 94.4 cents, and 93.1 cents respectively. The medium-term Ukraine-2022, Ukraine-2023, and Ukraine-2024 traded at the level of 90.8 cents, while the long-term Ukraine-2025, Ukraine-2026, and Ukraine-2027 were traded at an avg. 89.2 cents. We think that the gain on the sovereign Eurobond prices reflected some return of confidence by the market after the general negative reaction to the results of the presidential elections in the US. Among our corporate Eurobond picks, Privatbank-18 and Privatbank-21 lost 12 pts and 6 pts in prices respectively last week, while Ukrlandfarming-18 fell by 2 pts. DTEK-18 gained 50 bps, while RailUA-18 gained nearly 6 pts in prices. The prices of Privatbank’s issues were dumped by the rumors about a possible nationalization of the bank, followed by a negative assessment of the liquidity position of the bank by Fitch rating. Ukrlandfarming continues suffering from its standoff with the National Bank, in our view. We think that the gain of RailUA-18 and DTEK-18 mirrors a modestly positive market reception of the debt operations of the companies.

Money markets

Over the last week, the average USD/UAH exchange rate dropped by 1.3% w/w to UAH 25.67, closing at the level of UAH 25.72 on Friday. The average daily FX turnover on the interbank market decreased by 9.8% w/w to USD 153 mn, while FX trading volume amounted to USD 166 mn on Friday. The average outstanding amounts held on banks’ correspondent accounts decreased by 3.6% w/w or by UAH 1.5 bn to UAH 41.4 bn. Last week, most Kievprime indexes remained unchanged save the short-term Kievprime overnight (o/n) and Kievprime 1W, which gained 7 bps on avg. to be quoted at 13.6% and 14.7% respectively. KIevprime 1M was quoted at 16.7%, kievprime 2M and Kievprime 3M at an avg. 18.3%, whereas Kievprime 6M and Kievprime 1Y were quoted in the range of 18%. NBU extended UAH 2.8 bn refinancing to banks during the week (UAH 726 mn for the previous week), whereas banks acquired NBU deposit certificates worth UAH 28.3 bn (UAH 23.8 bn during the previous week).

Local bond markets

The Finance Ministry placed UAH 49 mn of domestic bonds last week. NBU, local banks, and non-resident players reduced their holdings of gov. domestic bonds by 0.3% w/w (-UAH 1 bn), 1.1% w/w (-UAH 1.8 bn), and 1.7% w/w (-UAH 176 mn) respectively. Non-bank corporates increased their holding by 2% w/w (UAH 276 mn). Secondary market activities for gov. bonds were distributed as follows: short-term bonds accounted for 23% of contracts and 21% of market volume, medium-term bonds made 77% and 79% correspondingly. USD denominated bonds represented 44% of contracts and 3% of the overall market volume. The total turnover of local govt. bonds on the “Perspectiva” SE amounted to UAH 2.4 bn, compared with UAH 2.5 bn for the previous week.

Corporate news

  • EBRD and Ukraine’s Government signed a Memorandum on assisting Oschadbank’s reform
  • Fitch Upgrades Ukreximbank and Oschadbank Long-Term Foreign Currency IDR to B- from CCC
  • Ukrainian Railway solicits waiver on events of default on local debts up to end of 2017
  • DTEK seeks maturity extension on the 2018 Eurobonds to 2024