Fixed Income
Ukrainian sovereign Eurobonds gained ground last week after the Finance Ministry managed to raise USD 350mn through placement of 2-year domestic USD-denominated bonds at 5.34%. Also, the country’s 2Q17 preliminary GDP growth figure of 2.4% YoY was better than expected given the headwinds created by Kyiv’s costly economic blockade of the Donbass occupied territories. However, the current pace of Ukraine’s economic growth remains rather unimpressive, and we would not be surprised if the full year GDP growth figure comes in at less than 1.8%, which is the government’s current forecast. Long-term benchmark Ukraine-27s added 1.1% to 99.3/100.3 (7.8%/7.7%) and quotes for Ukraine-19s (due in just over 2 years from now) edged up 0.3% to 103.9/104.4 (5.7%/5.5%). Meanwhile, the VRI derivatives (linked to Ukraine’s future GDP growth with expiration in 2040) continued their red-hot summer rally, jumping another 10% to 50.0/51.4 cents on the dollar.
