Bloomberg News

Ukraine 2014 Bonds Gain Most in Two Weeks on Russia Aid Pledge

February 18, 2014

Ukraine’s bonds due in June gained the most in two weeks as Russia pledged to resume a $15 billion bailout program that was halted amid political turmoil in Kiev.

The yield on the dollar notes fell 1.04 percentage points to 21.12 percent by 5:15 p.m. in Kiev. That’s the largest drop on a closing basis since Feb. 2. The rate is down from a record 22.99 percent on Feb. 14. The cost of insuring Ukrainian debt against non-payment for five years using credit-default swaps slid 21 basis points today to 1,175, CMA data show.

Russia’s government said yesterday it will purchase another $2 billion this week, after putting bond buying on hold last month until a new government was appointed following the resignation of Mykola Azarov as prime minister. President Viktor Yanukovych will submit his candidate for premier this week, parliamentary Speaker Volodymyr Rybak said yesterday.

The aid pledge will help Ukraine meet its foreign-currency funding needs and solidify Yanukovych’s power until elections next year, Vadim Khramov, a London-based analyst at Bank of America Corp., wrote in a report today. “It is in line with our base-line view that Russia is to continue its support and $2 billion will provide Ukraine with the necessary financing.”

The yield on Ukraine’s dollar debt maturing in April 2023 rose 41 basis points to 10.52 percent, according to data compiled by Bloomberg. The hryvnia was little changed at 8.8675 per dollar while the nation’s equity index dropped 4.2 percent today, the largest retreat since April 2013.

Violent Clashes

The Cause of Unrest in Ukraine

Protesters seeking Yanukovych’s ouster clashed with police as they tried to reach parliament to pressure lawmakers struggling to end a three-month political standoff. Police used concussion and flash grenades to stop rock-throwing marchers on Shovkovychna Street, about 100 meters from parliament. Molotov cocktails thrown from the crowd set a government truck on fire.

At least three protesters have been killed in the violence, with seven more in critical condition, opposition lawmaker Lesya Orobets said on her Facebook Inc. page. Olha Bohomolets, the doctor running the opposition’s medical team, told Radio Liberty more than 100 activists have been wounded.

Yanukovych’s government said at least 37 policemen were hurt. A fire broke out at Kiev’s City Hall. The State Security Service and the Interior Ministry issued a joint statement saying they will take all legal measures to “restore order” if protests continue after 6 p.m. in Kiev.

Merkel Meeting

The protests began in November when Yanukovych pulled out of a free-trade deal with the EU, opting instead to pursue closer ties with Russia.

Ukrainian opposition leaders Vitali Klitschko and Arseniy Yatsenyuk met German Chancellor Angela Merkel in Berlin yesterday to seek financial and political backing to form a new government. Yatsenyuk rejected Yanukovych’s offer to become premier on Jan. 25.

Russia probably offered to resume aid to help ensure the nomination of a “Russian-compliant” replacement for Azarov, Tim Ash, chief emerging-market economist at Standard Bank Group Ltd. in London, said by e-mail today.

“The announcement over the $2 billion disbursement was meant to send a clear message to Merkel, the EU and also U.S. that Russia remains serious about Ukraine, which it sees as being clearly in its strategic backyard, and is prepared to put its money where its mouth is,” Ash wrote. “Again this raises the stakes for the West.”

To contact the reporters on this story: Andras Gergely in Budapest at agergely@bloomberg.net; Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net


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