Ukrainian Bonds Fall 4th Day as Cease-Fire Talks Set to Continue

Ukraine government bonds fell, sending yields to a week-high, amid talks on extending a cease-fire in the country’s eastern regions that expires tonight.

The yield on the sovereign dollar-denominated notes due July 2017 rose 15 basis points to 8.84 percent at 5:45 p.m. in Kiev, trimming this quarter’s drop to 124 basis points. The hryvnia was unchanged at 11.75 per dollar, having lost 5.4 percent since April 1 and 30 percent in the last six months.

Optimism that the crisis may be de-escalating boosted Ukrainian bonds for a second month in June. German Chancellor Angela Merkel and French President Francois Hollande yesterday urged Russia and Ukraine to resolve the dispute. Ukrainian President Petro Porsoshenko’s office said the leaders will talk again today with Russia’s Vladimir Putin about extending the cease-fire and implementing a peace plan presented by Ukraine.

“Market participants are, probably correctly, trying to take some profit before the possible decision to extend or not extend the armistice between Ukraine and the separatists,” Ivan Tchakarov, chief Russia economist at Citigroup Inc. in Moscow, said in an e-mail today. “This creates some uncertainty and drives yields higher. So, yet, again, purely political news is the key driver behind bond pricing.”

Poroshenko signed a free-trade pact last week with the 28-member EU. Former President Viktor Yanukovych’s rejection of the accord triggered deadly protests in Kiev in November that ousted the pro-Russian administration. Russia responded by annexing Crimea from Ukraine in March and has voiced support for Russian speakers in Ukraine’s southeast, whom it says are under attack by their own government.

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