BS: Ukrainian Bonds Drop on Violence as Currency Curbs Spur Hryvnia
Ukrainian Eurobonds slid for a ninth day as Russia called for talks on statehood for its neighbor’s battle-torn southeast. The hryvnia jumped as the central bank curtailed access to foreign currency.
The yield on the government’s dollar-denominated notes maturing in July 2017 rose 10 basis points to 12.81 percent by 4:04 p.m. in Kiev, taking to 307 basis points the increase in the past nine days, the longest stretch since March 28, 2013. The currency strengthened 5.2 percent to 12.5475 per dollar, the biggest advance in two weeks.
Russian President Vladimir Putin said talks on the “statehood” status of southeast Ukraine are needed to resolve the crisis, according to a Channel One TV taped interview aired yesterday. The government in Kiev claimed about 1,600 Russian soldiers are advancing into the region, while the central bank will start barring individuals from getting foreign currency from their cards in Ukraine from tomorrow, Interfax reported.
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“The waning hope for peace is affecting Ukrainian Eurobond spreads,” Tatiana Orlova, a London-based economist at Royal Bank of Scotland Group Plc, said in e-mailed comments today. “I’m afraid it may go on for as long as the crisis in relations between Russia and Ukraine continues to escalate.”
Putin’s spokesman Dmitry Peskov later told reporters in Chelyabinsk, Russia, that the president isn’t seeking “statehood” for the region.
President Vladimir Putin requested negotiations on statehood “in order to serve the interests of people living there,” according to a television interview broadcast yesterday.
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Currency Curbs
The yield on Ukrainian dollar bonds due in April 2023 climbed five basis points to 10.24 percent, taking the discount versus the shorter-maturity debt to 251 basis points, the widest since May.
The central bank’s announcement helped stem the hryvnia’s slide this year to 34 percent against the dollar, the worst performance among more than 170 currencies tracked by Bloomberg after Ghana’s cedi. All money transfers must be conducted in the local currency, Interfax reported, citing a document it obtained from central bank.
The curbs are the latest step by Ukraine to stem the depreciation as deepening political turmoil pushes the economy deeper into recession. It announced a cap on foreign-currency purchases by individuals in February, while also directly intervening in the market and raising interest rates this year to curtail the retreat.
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Ukraine’s dollar bonds slumped 7 percent in August, the worst performance among 14 eastern European countries in the Bloomberg Dollar Emerging Market Sovereign Bond Index. The country has more than $16 billion of principal and interest payment maturing through the end of 2015, according to data compiled by Bloomberg.
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 Daliah Merzaban, Paul Armstrong
