Ukrainian Bonds Drop With Stocks as Tensions Rise Near Border

Ukrainian Eurobonds fell the most in a month as pro-Russian protesters seized government buildings in the east of the country, stoking speculation that tensions in the region may escalate. Stocks and the hryvnia dropped.

Ukrainian sovereign debt maturing June 4 fell 1.11 cents to 96.925 cents on the dollar, the biggest drop since March 6, according to data compiled by Bloomberg. The Ukrainian Equities Index declined 2.4 percent to 1,056.30 at 5.05 p.m. in Kiev, the most in more than three weeks. The hryvnia weakened 0.9 percent to 11.700 per dollar.

Ukrainian debt snapped a four-week rally as demonstrators stormed administration offices in two cities close to the Russian border. That echoed the actions of protesters who took over Crimea’s assembly and paved the way for Russia to annex the province last month. Russian forces shot a Ukrainian military officer to death in Crimea, the Defense Ministry in Kiev said.

“There are very negative headlines coming from the political situation in eastern Ukraine, which are pushing yields up,” Vadim Khramov, an analyst at Bank of America Corp., said by phone from New York. “Russia is unlikely to enter eastern Ukraine, but risks of continued protests and potential escalation of the situation in eastern Ukraine exist, creating more volatility for Ukrainian assets.”

Separatists in the city of Donetsk demanded a referendum to join Russia and a boycott of Ukraine’s May 25 presidential election. Ukrainian Prime Minister Arseniy Yatsenyuk said Russia’s government was trying to split the country.

The yield on Ukraine’s Eurobonds due in April 2023 rose 58 basis points to 9.26 percent, the highest since March 26.