Fixed Income
Ukrainian sovereign Eurobonds got hammered last week, reaching what can be viewed as distressed yield levels, as fighting in the country’s contested eastern Donbass region ramped back up after a lull over the holiday period. Heavy artillery shelling around Donetsk Airport prevented monitors from the OSCE from reaching the area, and the upsurge in fighting and aggressive rhetoric from both Ukrainian and separatist leaders resulted in the indefinite postponement of a peace summit between President Poroshenko and the leaders of Russia, Germany and France. Provoking this fresh wave of violence could be part of Moscow’s efforts to paint Ukraine as the aggressor in the Donbass conflict and thereby undermine the country’s attempt to obtain new IMF and other Western funding to prop up Kyiv’s dire sovereign financing situation. Although giving up on recapturing the Donbass still looks like a politically impossible task for Poroshenko, there is really no other solution that would quickly pull Uk
