Fixed Income
Quotes for Ukrainian sovereign Eurobonds continued their rally, rising for a 4th straight week and marking their best 1-month performance in more than two years. Benchmark Ukraine-23s edged up 1.3% to 76.0/78.0 (12.5%/12.0%). Although the restructuring process for Ukrainian sovereigns still has certain risks, in particular a threat from a group of bondholders to block the retrofitting of the maturing Ukraine-15s issue, the general market perception is that the deal is now done. On Thursday (Sept 17), Parliament approved all the necessary bills needed for the exchange of 14 outstanding Eurobond issues maturing in the 2015-2023 period for 9 new issues with redemption in 2019-2027. However, there is still speculation about how to price the VRI (value recovery instruments), which would kick in to reduce the deal’s 20% principal writedown in the event that Ukraine’s economic growth rises above 3% in 2021-2040.
