Ukraine Eurobonds Rise 6th Day as Russia Says Troops Withdrawing

Ukraine’s 2017 Eurobonds rose for a sixth day, sending yields to a five-week low, after state television in Moscow reported Russian troops were withdrawing from the border between the two nations.

The yield on the dollar-denominated note due July 2017 fell 46 basis points to 11.11 percent, the lowest level since April 11. The hryvnia lost 0.4 percent to 12 per dollar at 3:30 p.m. in Kiev, the weakest since April 14.

Soldiers in three Russian regions bordering Ukraine were ordered back to their bases, according to the TV report, though NATO and the U.S. haven’t confirmed the pullback. President Vladimir Putin has welcomed contacts between the Kiev authorities and supporters of a decentralization of powers to the regions. Ukrainian Prime Minister Arseniy Yatsenyuk said the government will try to ensure presidential elections scheduled for May 25 will go ahead.

“The negative implications of this happening for the third time are more than offset by the positive implication that troops might be moving away from Ukraine’s borders,” Ivan Tchakarov, Moscow-based chief economist for Russia at Citigroup Inc. said in e-mailed comments today.

Ukrainian forces continued to clash with pro-Russian insurgents in the Donetsk and Luhansk regions, where pro-Russian groups have set up self-proclaimed administrations.

The country’s richest businessman, Rinat Akhmetov, criticized separatist supporters of the so-called Donetsk People’s Republic and demanded protests today, according to a statement on his System Capital Management company website.

Election Outcome

Russia will probably recognize the outcome of the presidential election, analysts at Bank of America said in a note yesterday. The bank raised its recommendation on Ukraine’s bonds to marketweight from underweight, as did Commerzbank AG.

In a May 6-8 poll by GFK Ukraine, billionaire Petro Poroshenko, who owns a confectionery empire, placed first with 40 percent. Sergiy Tigipko was second in support at 9 percent, surpassing former Prime Minister Yulia Tymoshenko, who came third with 8.8 percent. The mobile phone survey of 810 people had a margin of error of 3.5 percent.

Markets would view a Poroshenko victory “much more positively than Tymoshenko, because while the former has been sending more conciliatory signals, the latter has been using much more fiery rhetoric in order to help close the gap with Poroshenk,” Tchakarov said.

The yield on Ukraine’s Eurobond due April 2023 fell 32 basis points to 9.30 percent today, the lowest since April 7.

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 Zahra Hankir, Chris Kirkham

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