Ukraine Dollar Bonds Plunge as Police Crack Down on Protesters

Photographer: Aleksandr Yalovoy/Kommersant Photo via Getty Images

A person demonstrates in front of riot police outside the presidential office in Kiev, Ukraine, on December 1, 2013. Close

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Photographer: Aleksandr Yalovoy/Kommersant Photo via Getty Images

A person demonstrates in front of riot police outside the presidential office in Kiev, Ukraine, on December 1, 2013.

Ukrainian bonds tumbled, sending yields to the highest on record, and the nation’s credit risk jumped after authorities violently dispersed protests against President Viktor Yanukovych.

The yield on the junk-rated sovereign’s dollar bonds due June 2014 increased 274 basis points to a record 19.34 percent as of 5:22 p.m. in Kiev. That compares with an average of 8.52 percent since the note was sold in August 2012 and an all-time low of 5.34 percent set in March. The cost to insure Ukraine’s bonds through credit-default swaps jumped 81 basis points to a two-week high, surpassing Cyprus as the costliest in Europe.

The protests are heightening investor concern that Ukraine will struggle to meet $15.3 billion in debt payments over the next two years after it suspended aid talks with the International Monetary Fund. Yanukovych’s opponents are trying to shut down government buildings and seek a national strike after he refused to sign a trade agreement with the European Union, opting instead for closer ties with Russia. At least 109 people were hospitalized following clashes between police and protesters last night, Kiev’s government said in a statement.

“Instability is the main factor frightening investors,” Ilya Mozgovoy, who helps oversee about $1 billion as the head of asset management at Allianz Investments in Moscow, said by phone. “It’s unclear how the events will develop and it’s unclear what the resolution will be, which is the worst state for bondholders.”

The brokerage’s parent company, Allianz Asset Management, holds Ukraine’s bonds, according to data compiled by Bloomberg.

‘Maintain Trust’

Ukraine’s central bank will “increase its presence” on the country’s currency market to “keep balance and mitigate risks,” Governor Ihor Sorkin said in a video posted on regulator’s website today.

Sorkin asked the country’s residents to “maintain trust” in the nation’s banks and in the safety of their savings, according to the video. The hryvnia weakened 0.1 percent to 8.2390 against the dollar and advanced 0.2 percent to 11.1557 per euro, data compiled by Bloomberg show.

The yield on Ukraine’s April 2023 dollar notes jumped 61 basis points, or 0.61 percentage point, to 10.57 percent, the highest since the notes were sold seven months ago. Ukraine’s CDS stood at 1,068 basis points, the highest in the world following Argentina and Venezuela, the data show.

The sovereign’s foreign-currency debt is rated Caa1, or seven levels below investment grade, at Moody’s Investors Service and at B-by both Standard & Poor’s and Fitch Ratings.

To contact the reporter on this story: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

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

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