Clearstream to open account with Ukraine central bank

The Clearstream international securities depository and
the National Bank of Ukraine (NBU) signed on March 13 an agreement for 
correspondent relations and the further opening of securities accounts at the
NBU’s depository. “Establishing a link with Clearstream simplifies the access
of foreign investors to the Ukrainian securities market, namely, domestic
government bonds,” the NBU commented about the deal in a press release. The
link will reduce transaction costs and time for non-residents to trade
Ukrainian local bonds, which “will increase the attractiveness and liquidity of
the Ukrainian government securities market,” the NBU wrote. Ukraine’s Finance
Minister Oksana Markarova called the event “a long-awaited step towards opening
the Ukrainian local bond market to foreign investors.”

Alexander Paraschiy: Clearsteam
entering Ukraine can become a breakthrough for UAH-denominated local government
bonds, as access to them for non-residents will become simplified
significantly. Currently, the purchase of such bonds directly is very
time-consuming (opening accounts takes a couple of months), while indirect
purchases – e.g. via Citibank – are also inefficient as the derivatives offer a
2-4pp lower interest rate than original government bonds. The NBU was expecting
that the radically simplified access of non-residents to the local government
bond market will enable the government to significantly increase demand for its
bonds. In neighboring countries, non-residents hold about one-fourth of local
government bonds, while their share in Ukraine is only 3% currently.

These days, UAH-denominated government bonds maturing
in less than a year trade at an 18.5%-19.5% rate, which – amid the relative
stability of the Ukrainian currency (the hryvnia has strengthened vs. the U.S.
dollar by 3.7% YTD) – may offer a solid return for risk-seeking non-residents.
And the recently liberalized foreign currency regulation in Ukraine reduces
exit risks for such investments.