Ukraine attracts USD 368 mln from local Eurobond placement

Ukraine’s Finance Ministry reported on Aug. 16 it managed to place USD 368 mln in local two-year dollar-denominated bonds at 6.69% YTM. The yield was significantly lower than for the two-year bonds placed a month ago at 7.15%. The total amount of dollars raised by Ukraine year-to-date from local Eurobond placements has reached USD 2.36 bln, according to our calculations.

Alexander Paraschiy: The reduced yield on two-year local Eurobonds seems to be the result of excessive dollar liquidity at Ukrainian banks, which is a result of continued growth of dollar deposits and few means to invest dollars inside Ukraine. Interestingly, the spread of the two-year local Eurobonds (at placements) to the nearest traded international Eurobond (UKRAIN maturing on Sept. 1 2019) amounted to -1.3 pp yesterday, while a month ago it was -0.6 pp and two months ago it was -1.0 pp. The widened spread can be explained, again, by excess domestic dollar liquidity, as well as by the smaller geopolitical risks assumed by local investors today, as compared to international funds.