Ukraine Bonds Snap Selloff on Western Aid Talk as Hryvnia DropsAndras Gergely and Krystof Chamonikolas
Ukrainian bonds rebounded from a six-week low amid speculation the European Union will offer financial aid to rival emergency loans from Russia for Europe’s riskiest sovereign. The hryvnia slumped.
Yields on the dollar-denominated debt due this June fell 57 basis points to 14.13 percent by 2:57 p.m. in Kiev, according to data compiled by Bloomberg. The rate rose 911 basis points, or 9.11 percentage points, in the previous two weeks as Ukraine’s street protests against President Viktor Yanukovych’s regime turned violent and his prime minister resigned.
Western nations are “ready to help Ukraine,” Arseniy Yatsenyuk, an opposition leader, said yesterday after Russia threatened to delay further funding from a $15 billion package until its western neighbor has a new government. Any EU aid would be tied to “strict” conditions, Maja Kocijancic, a spokeswoman for Catherine Ashton, the bloc’s foreign policy chief, told reporters in Brussels today.
“For the West to step in there must be a real change in politics, ideally Yanukovych to resign or snap elections this year,” Michael Ganske, head of emerging markets at Rogge Global Partners Plc in London, said by e-mail today. “Investors naively assumed that the Russian bailout is happening disregarding what is happening politically in Ukraine.”
Rogge, with $8.5 billion of emerging-market assets, has an underweight position on Ukrainian bonds, Ganske said.
Potential “short-term assistance” would help Ukraine through a transition period and prepare grounds for a presidential election, Ashton told the Wall Street Journal. About 50,000 people gathered at the capital’s Independence Square yesterday, according to TV5 estimates, demanding the departure of Yanukovych after Prime Minister Mykola Azarov quit last week.
The hryvnia depreciated 0.7 percent to 8.6750 per dollar, its weakest since September 2009, after a 4.4 percent decline in January. The cost of insuring the country’s debt with credit-default swaps fell five basis points to 1,049, according to CMA data.
Yanukovych’s snub of a cooperation agreement with the EU in November in favor of closer ties with Russia triggered the first deadly protests in the country’s 22 years of independence. The potential for EU aid came after Russia lent Ukraine $3 billion in December to help it avoid a default and pledged another $12 billion this year.
“We are a long way still from this being realized,” Timothy Ash, a strategist at Standard Bank Group Ltd., wrote by e-mail from Kiev today. “Talk is very cheap, Ukraine needs hard cash support.”