Fixed Income
It was another miserable week for Ukraine’s sovereign Eurobonds, which got hammered again on widely circulated reports that the country urgently needs several billions dollar to avoid a default. The Financial Times newspaper wrote that the IMF has identified a USD 15bn shortfall in its Ukraine bailout; although the FT’s article appeared to quote an anonymous source taken out of context, the damage was done. We assume that the USD 15bn figure was inflated by the obvious need for around USD 10bn to strengthen the National Bank’s depleted foreign currency reserves (which have fallen from USD 20.4bn as of Jan 1 to USD 9.97bn), which is a problem that has been well-known to investors for some time. Meanwhile, newly appointed Finance Minister Natalia Jaresko strongly denied any consideration that Ukraine is going to default. Ukraine’s 5-year credit-default swap rate jumped 8.3% to 1,950 bps; the historical high for this gauge was registered at 3825 bps in March 2009, but that spike lasted on
