Ukraine Eurobonds Drop on Bets Russia to Seek Early Debt Payment
Ukraines foreign-currency borrowing costs rose for a second day amid speculation Russia will demand early repayment of a $3 billion bond, exacerbating the war-torn nations financing difficulties.
Ukraines dollar-denominated debt maturing July 2017 fell 2.5 cents to 60.01 cents on the dollar by 1:27 p.m. in Kiev after rising 2.2 cents last week as the European Union pledged further financial aid. The yield on the notes rose 217 basis points to 34.08 percent, nearing the record 36.10 percent reached last week.
The threat comes as International Monetary Fund representatives visit Kiev to review Ukraines austerity measures before releasing additional funds from a $17-billion bailout package. The government in Moscow really has every reason to demand early repayment of the loan because Ukraines public debt has exceeded 60 percent of gross domestic product, Russias state-run RIA news service reported Jan. 10, citing Finance Minister Anton Siluanov.
The threat of Russia demanding an early repayment is more direct now, Sergey Fursa, a Kiev-based fixed-income trader at Dragon Capital, said by e-mail today. Ukraine may not meet the demand as it may have the legal means to avoid paying ahead of the December deadline, he said.
A mission from the IMF will work in Ukraine until Jan. 29 on an upgraded memorandum on economic policies, the countrys central bank said on its Facebook page today.
The Kiev-based cabinet wants to expand the standing $17 billion loan agreement by a further $15 billion to help meet debt payments and increase foreign-currency reserves. Ukraine depleted its foreign cash pile as the central bank sought to shore up the hryvnia and as the country paid for natural gas imports from Russia. Economic output dropped an estimated 7.5 percent last year in what central bank Governor Valeriya Gontareva has called a full-blown financial crisis.
Meeting the increased financing needs still appears a very tough ask at present, given the strained political and security outlook, Timothy Ash, the London-based chief economist for emerging markets at Standard Bank Group Ltd., said by e-mail. I cannot see any new IMF disbursements unless the Fund feels comfortable that sources of the new $15 billion in financing have been secured.
To contact the reporter on this story: Marton Eder in Budapest at meder4@bloomberg.net
To contact the editors responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net Alex Nicholson, Matthew Brown
Press spacebar to pause and continue. Press esc to stop.
Link:
Ukraine Eurobonds Drop on Bets Russia to Seek Early Debt Payment