Fixed Income
Ukrainian sovereign Eurobonds slid further last week amid negative news flow from the Donbass war zone and uncertainty about what Finance Minister Natalia Jaresko had in mind when she said the government intends to hold talks with creditors to “improve Ukraine’s medium-term debt sustainability”. Fears of a principal haircut alongside expected maturity extensions sent quotes for short-term Ukraine-15s due in September sharply lower. The issue plummeted 9.6% to 63.2%/66.2% (93.6%/83.5). On the positive side, however, IMF chief Christine Lagarde said late in the week that the IMF board will soon meet to review a request for an “extended fund” facility for Ukraine which would replace the existing stand-by agreement, and a consensus seems to be emerging in the West that the Poroshenko government, if it delivers on its commitments, needs and deserves a bailout that could exceed USD 30bn over the next two years.
