Fixed Income Weekly (January 30, 2017)


Macro & politics update

  • Industrial production increased by 4.5% y/y in December of 2016. On aggregate, industrial production increased by 2.4% y/y in 2016, the first time returning to the positive zone since 2012. Mining output declined by 0.3% y/y. Energy generation and distribution expanded by 2.6% y/y. Manufacturing led industrial growth, marking a 3.5% y/y increase
  • On January 26, 2017, the NBU Board decided to maintain its key policy rate at 14%, referring to inflation risks hampering the achievement of inflation targets in 2017-2018. The regulator upgraded the GDP projections for 2017 to 2.8%


Eurobonds overview

Last week, the sovereign Eurobonds Ukraine-2019 gained 0.9 cents to be traded at 98.8 cents, whereas Ukraine-2024 and Ukraine-2027 added 0.3 cents to be traded in the range of 94.1 cents and 92.9 cents respectively. Ukraine-2020 and Ukraine-2021 lost 0.4 cents, and were traded at an avg. 96.4 cents and 95.5 cents; Ukraine-2022 and Ukraine-2023 declined by 0.7 cents to be traded in the range of 94.4 cents; Ukraine-2025 and Ukraine-2026 lost 1.0 cents and were traded at an avg. of 92.1 cents. We think that the rumors about a revision of the US policy towards the sanctions against Russia, together with another postponing of the disbursement of the IMF loan have shifted market moods towards the shortest and longest extremes of the maturity continuum, sending the prices on most sovereign notes down. Among our corporate Eurobond picks Ferrexpo-19 gained 3.9 pp., Railway-21 added 4.6 pp., whereas Ukrlandfarming-18 and Avangard-18 lost an avg. 37 bps. Railway-21 most likely gained from the strong backing of the company’s management from the Prime-Minister, on top of the launch of the large scale investment and development program of the company. Ukrlandfarming-18 and Avangard-18 most likely lost on complicating relations of their major shareholder with the NBU.

Money markets

Over the last week, the average USD/UAH exchange rate decreased by 1.1% w/w to 27.24, closing at the level of UAH 27.19 on Friday. The average daily FX turnover on the interbank market increased by 4.7% w/w to USD 150 mn, while FX trading volume amounted to USD 123 mn on Friday. The average outstanding amounts held on banks’ correspondent accounts increased by 7.0% w/w or by UAH 3.4 bn to UAH 51.4 bn. Last week, the quotations on all Kievprime indexes remained unchanged. The short-term Kievprime Overnight (o/n) was quoted at 13.0%, Kievprime 1W at 14.5%, and Kievprime 1M at 16.1% on avg. Kievprime 2M and Kievprime 3M quoted at 18.0%; Kievprime 6M and Kievprime 1Y were quoted at 19.0%. NBU extended UAH 158 mn refinancing to banks during the week (UAH 464 mn for the previous week), whereas banks acquired NBU deposit certificates worth UAH 68 bn (UAH 54 bn during the previous week).

Local bond markets

The Finance Ministry placed domestic bonds worth UAH 947 mn last week. NBU made no operations with gov. domestic bonds, Non-Bank Corporates increased their gov. bond holding by 0.8% (+UAH 189 mn), whereas local banks and non-resident players reduced their holdings by 0.2% (-UAH 480 mn) and 0.7% (-UAH 46 mn) respectively. Secondary market activities for gov. bonds were distributed as following: short-term bonds accounted for 18% of contracts and 23% of market volume, medium-term bonds made 83% and 77% correspondingly. USD denominated bonds represented 28% of contracts and 26% of the overall market volume. The total turnover of local govt. bonds on the “Perspectiva” SE amounted to UAH 3.1 bn, compared with UAH 2.4 bn for the previous week.

Corporate news

  • MHP reported 6% y/y poultry production, 7% y/y poultry sales increase in 2016
  • Ukrainian agricultural community asks PM Volodymyr Groysman to stand for Ukrlandfarming
  • Metinvest reported 3% m/m (22.9% y/y) revenue increase in November 2016
  • Kernel successfully placed its debut 2022 USD 500 mn 8.75% Eurobond