Fixed Income
Ukraine’s sovereign Eurobonds continued to trend lower last week, as the scenario of sovereign restructuring and/or bondholder haircuts next year weighed on the minds of international investors. Ukraine’s record-high borrowing costs are showing how difficult the country’s road toward Europe is going to be. The cost to insure the nation’s debt against non-payment shows a 60% probability of default within five years, and 5-year Ukraine credit-default swaps are at 1800 bps, a level previously exceeded only briefly during a spike around the time of the 2008-09 financial crisis. Ukraine’s public external debt amounted to USD 39.8bn as of 1 Nov 2014 out of total public debt of USD 73bn, which is equivalent to about 60% of the country’s GDP. In other glum news, the NBU reported last week that its foreign currency reserves fell by USD 2.6bn in November to USD 10.0bn.
