Ukrainian Dollar Bonds Rally on Speculation Over Russia Loans

Photographer: Vasiliy Klokov/Bloomberg

The hryvnia weakened for the fourth time in five days. Close

The hryvnia weakened for the fourth time in five days.

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Photographer: Vasiliy Klokov/Bloomberg

The hryvnia weakened for the fourth time in five days.

Ukrainian bonds rallied on speculation the government may receive as much as $15 billion in loans from Russia to shore up its finances.

The sovereign’s dollar notes due June 2014 advanced $0.755 to $96.755 at 6:54 p.m. in Kiev, reducing the yield 1.78 percentage point to a three-week low of 15.48 percent. The 2023 dollar debt yield dropped 25 basis points to 9.91 percent, the lowest this month, according to data compiled by Bloomberg. The hryvnia weakened for the fourth time in five days.

Talks are under way about loans and the price Ukraine pays for Russian natural-gas deliveries, said two people familiar with the negotiations, who asked not to be identified because they haven’t been completed. Ukraine may receive as much as $5 billion this year, one of the people said. The biggest street protests in almost a decade broke out on Nov. 21 after President Viktor Yanukovych snubbed a trade agreement with the European Union in favor of closer ties with Russia.

“Questions will be how much of these funds are cash financing,” Timothy Ash, a London-based strategist for emerging markets at Standard Bank Group Ltd., said in e-mailed comments today. “This might just further incense the street.”

Yanukovych is scheduled to meet Russian President Vladimir Putin in Moscow tomorrow as the Ukrainian economy struggles with its third recession since 2008 and foreign currency reserves dropped to $18.8 billion last month, a 51 percent decline over two and a half years, central bank data show.

The cost of insuring Ukraine’s debt against non-payment with credit-default swaps, which rise as investor perceptions of creditworthiness worsen, dropped two basis points, or 0.02 percentage point, to 1,048 basis points, according to data provider CMA. The hryvnia weakened 0.3 percent to 8.2945 per dollar, data compiled by Bloomberg show.

To contact the reporter on this story: 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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