Fixed Income
Ukrainian sovereigns were hit by a heavy selloff early last week amid still-cautious emerging market sentiments and a reduction in the country’s rating from B3 to Caa1 by Moody’s which had occurred on the previous Friday (Sept 20). Moody’s said the decision was based on liquidity concerns over falling foreign reserves and higher gas imports in 2H13, as well as risks posed by the threat of Russian punitive measures against Ukraine for signing a free trade deal with the EU. Ukraine’s 5-year credit default swaps (CDS) jumped to a 3-year high of 1,087 bps. Importantly, last week’s developments make it look rather unlikely that the government will be able to place any more Eurobond issues before year-end. Benchmark 10-year Ukrainian Eurobonds slid 5,5% to close at 83.6%/84.6% (10.2%/10.1%), while medium term papers suffered even more, with Ukraine-17s plunging 6.4% to end the week at 85.8/87.3 (11.2%/10.6%). Quasi-sovereign Naftogaz-14s, which are due in just under a year’s time, droppe
