Fixed Income
Ukrainian sovereign Eurobonds rallied sharply last week after a preliminary agreement between the new Kyiv government and the IMF on new lending was announced, with an initial aid tranche of USD 3bn possible by the end of April. The country’s longest-maturity issue, Ukraine-23s, shot up by 9.7% to 92.5/97.3 (8.7%/7.9%). We expect the major credit rating agencies to wait until the first installment of IMF money is actually disbursed before they upgrade Ukraine’s sovereign rating; although Parliament has already approved several of the high-profile budget cuts and tax hikes demanded by the IMF, there could still be some last-minute haggling over the details of the required measures. On the international political front, tensions over the situation in Eastern Ukraine seemed to scale back somewhat, as Russia insisted that it is not planning a military offensive there despite the presence of its army units near the border.
