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Ukrainian Bonds Drop First Time in Week Amid Deadly Clashes

Ukrainian Eurobonds fell, sending yields higher for the first time in a week, as deadly clashes resumed between government forces and pro-Russian separatists before a vote on autonomy in eastern regions.

Yields on government dollar-denominated notes due in April 2023 rose 10 basis points to 10.17 percent by 4:26 p.m. in Kiev after dropping 76 basis points in the previous four days. The hryvnia was unchanged at 11.655 per dollar, having depreciated 29 percent this year, the worst performance among more than 170 currencies monitored by Bloomberg.

Rebels in the Donetsk and Luhansk regions plan to hold plebiscites on secession on May 11, even after Russian President Vladimir Putin discouraged them from conducting the votes. About 20 separatists and at least one serviceman died as militants attacked a police building in the eastern port city of Mariupol today, Interior Minister Arsen Avakov said on Facebook. Russian and Ukrainian markets are shut for a holiday commemorating the Soviet victory over the Nazis in World War II.

The security crisis, which “escalated sharply on the ground in the last week,” carries “enhanced risk of further major incidents” over the next two days, Alina Slyusarchuk and Jacob Nell, London-based analysts at Morgan Stanley, wrote in an e-mailed report today.

Putin is visiting the Crimean peninsula for the first time since he annexed it in March.

Russia’s ruble weakened 0.9 percent to 35.3392 per dollar, the worst performance among 24 developing-nation currencies today, according to data compiled by Bloomberg. Yields on the government’s dollar bonds maturing in September 2023 fell two basis points to 5.02 percent.

“Given the high risk of a further spread of violence in Ukraine, we expect both Ukrainian and Russian Eurobonds to erase their recent gains in the next two weeks,” Tatiana Orlova, a London-based economist at Royal Bank of Scotland Group Plc, wrote in an e-mailed report today.

To contact the reporter on this story: Andras Gergely in Budapest at agergely@bloomberg.net

To contact the editors responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net Chris Kirkham, Ash Kumar

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