Fixed Income
Ukrainian sovereign Eurobonds last week climbed to their highest level since their placement in late 2015 following the country’s debt restructuring. The shortest outstanding issue, Ukraine-19s, edged up by 0.5% to 99.3/100.0 (8.0%/7.7%) and Ukraine-26s, which we consider as the benchmark, added 1.3% to close at 96.5/97.3 (8.3%/8.2%), putting their implied spread to US 10-year Treasures at 680 bps. The VRI derivatives (linked to Ukraine’s future GDP performance) rose 0.7% to 33.3/34.3 cents on the dollar. The situation in Ukraine was one of the main topics in a conversation of the leaders of Germany, France and Russia on Jul 8, but no details were released from those talks. The Kremlin published a quite standard statement stressing the need for a political solution to the conflict in the Donbass. However, we assume that the EU is continuing to push both Moscow and Kyiv for more visible action to establish a permanent peace on the de-facto occupied territories in Eastern Ukraine.
