Fixed Income
High regional tensions between Ukraine and Russia ahead of this weekend’s secession referendum in Crimea pushed quotes for Ukrainian Eurobonds to their lowest level since the round of sharp gains that followed Victor Yanukovich’s sudden abandonment of the presidency three weeks ago. Long-term benchmark issue Ukraine-23s dropped by 3.3% to 82.2/83.5 (10.6%/10.4%). Ominously, Moscow has faced down US demands that it back off from Crimea, damaging Western credibility, and the focus of the standoff is now shifting to the cities of Kharkiv and Donetsk in Eastern Ukraine, both the sites of aggressive confrontations between pro-Russian and pro-Ukrainian demonstrators. However, we see a large upside for Ukrainian sovereigns if a deal between Kyiv and Moscow can be reached, with serious economic and investment climate reforms likely to take place under a new pro-EU Ukrainian government following free elections later this year.
