Fixed Income
Ukraine’s sovereign Eurobonds took a pounding last week after the unsanctioned elections in Donetsk and Lugansk provinces moved the separatist-occupied territories closer to secession from Ukraine and resulted in a renewal of pro-war sentiments in Kyiv. President Poroshenko said he will cancel the Minsk autonomy agreement for the region, which could in turn end the Sept 5 ceasefire deal. All of this greatly unnerved investors, who understand that Ukraine’s ability to normalize economic activity depends on a peaceful resolution of the Donbass conflict. The latest released macro data showed that headline consumer inflation reached 20% and the GDP contracted by 5.1% YoY in 3Q14; these dismal figures were actually better than expected and probably manipulated by the state agency.
