Fixed Income Weekly (February 14, 2017)


Macro & politics update

  • Ukraine’s GDP growth in 4Q2016 is estimated in the range of 4.5% to 4.8% in comparison with the fourth quarter of 2015, the Head of Ukraine’s State Statistics Service Ihor Verner reported at a session of the Government on February 8, 2017
  • Consumer prices increased by 1.1% m/m in January 2017. Additional inflation risks have emerged, driving the NBU inflation expectation outlook for 2017 to the level of 9.1%
  • Ukraine’s foreign reserves contracted by 0.6% m/m in January 2017, and amounted to USD 15.4 bn by February 1, 2017
  • The issue of the next tranche from the International Monetary Fund (IMF) under the EFF program to Ukraine has not been put on the agenda of the meetings of the IMF Executive Board for the period up to February 17, 2017. Ukraine’s PM expects the IMF Board’s resolution by end of February
  • The EU is considering the extension of the second tranche of the Macro-Financial Assistance to Ukraine in the amount of EUR 600 mn (USD 640 mn) in the forthcoming weeks


Eurobonds overview

Last week, all prices on the sovereign Eurobonds gained 2.9 cents on avg., save Ukraine-2019 and Ukraine-2024 which increased by 1.9 cents to be traded at 99.7 cents and 94.6 cents respectively. Ukraine-2020, Ukraine-2021, and Ukraine-2022 traded in the range of 98.6 cents, 97.7 cents, and 96.5 cents. Ukraine 2023 traded at 95.7 cents. Ukraine-2025 Ukraine-2026, and Ukraine-2027 traded at 94.0 cents on avg. We think that the sovereign Eurobond prices received support from the statements of the IMF officials about an imminent disbursement of the next credit tranche to the country. Among our corporate Eurobond Ukrlandfarming-18, and Ukrainian Railway-21 gained 3 pp. and 50 bps respectively, while Avangard-18 remained unchanged. DTEK-24 and Ferrexpo-19 lost 1.3 pp. and 86 bps respectively. We think that the prices on the Ukrlandfarming’s and Ukrainian Railway’s notes continued gaining from the strong support the companies received from the business community and the Prime-Minister in their standoff against the NBU for the former, and against the infrastructure minister for the latter. The loss on DTEK-24 and Ferrexpo-19 most likely reflects a market adjustment after the strong price rally of the previous weeks.

Money markets

OOver the last week, the average USD/UAH exchange rate increased by 0.1% w/w to 27.09, closing at the level of UAH 27.21 on Friday. The average daily FX turnover on the interbank market decreased by 8.1% w/w to USD 147.6 mn, while FX trading volume amounted to USD 183.5 mn on Friday. The average outstanding amounts held on banks’ correspondent accounts decreased by 13.0% w/w or by UAH 6.0 bn to UAH 40.0 bn. Last week, the quotations on nearly all Kievprime indexes remained unchanged, save the shortest Kievprime overnight (o/n) and Kievprime 1M, with the former losing 0.05% to be quoted at 12.9% and the latter gaining 0.02% to 16.1%. Kievprime 1W was quoted at 14.5%, Kievprime 2M and Kievprime 3M quoted at 18.0%; Kievprime 6M and Kievprime 1Y were quoted at 19.0%. NBU extended UAH 42 mn refinancing to banks during the week (UAH 438 mn for the previous week), whereas banks acquired NBU deposit certificates worth UAH 68 bn (UAH 70 bn during the previous week).

Local bond markets

The Finance Ministry made no domestic bonds placement last week. NBU made no operations with gov. domestic bonds. Non-Bank Corporates and non-resident players reduced their holdings of gov. domestic bonds by 0.5% w/w (-UAH 110 mn) and by 2.0% w/w (-UAH 126 mn) respectively, whereas local banks increased their holdings by 0.3% w/w (UAH 790 mn). Secondary market activities for gov. bonds were distributed as following: short-term bonds accounted for 28% of contracts and 51% of market volume, medium-term bonds made 72% and 49% correspondingly. USD and EUR denominated bonds represented 41% of contracts and 35% of the overall market volume. The total turnover of local govt. bonds on the “Perspectiva” SE amounted to UAH 2.0 bn, compared with UAH 2.4 bn for the previous week.

Corporate news

  • Metinvest announced the occurrence of the effective date on the restructuring agreement on its Eurobonds and PXF facilities