Ukraine Eurobonds Jump as JPMorgan Questions Need for Writedown
Ukrainian Eurobonds climbed to the highest level since mid-February as investors wagered the nation’s restructuring talks with creditors are gathering pace and JPMorgan Chase & Co. said the case for principal cuts is weakening.
Ukraine’s $2.6 billion of notes maturing July 2017 rose 2.18 cents, the most since Jan. 23, to 49.10 cents on the dollar by 6:56 p.m. in Kiev. The nation’s 2023 notes jumped 1.28 cents to 52.86 cents. Talks between advisers in London will intensify this week before a progress call with bondholders on June 5, the Finance Ministry said in a statement Friday.
It’s harder for Ukraine to justify its insistence on a principal writedown after it posted a “significant” budget surplus in the first four months of this year, JPMorgan analysts led by Nicolaie Alexandru wrote in an e-mailed note today. The better fiscal position has improved its debt-to-GDP profile relative to International Monetary Fund projections and is “providing the savings that Ukraine is aiming for,” the London-based team said.
“Clearly, there is positive momentum in Ukraine, there are buyers who believe in a quick resolution,” Pavel Mamai, who helps oversee $140 million in emerging-market assets as co-founder of Promeritum in London, said by e-mail on Monday. “The JPMorgan research indicating less need for a haircut may have helped.”
Ukraine’s bonds surged last week after Bloomberg reported the details of a creditor-group proposal that it says meets IMF targets for liquidity and debt sustainability yet doesn’t include any writedowns.
First Review
The IMF completed its first review of Ukraine’s bailout program on May 29 and said there had been “good program implementation,” even as it predicted a larger economic contraction this year of 9 percent from 5 percent.
Ukraine needs to show its making progress on a deal with bondholders by mid-June to qualify for the next slice of a $17.5 billion IMF loan. The IMF expects to finalize an agreement that can be taken for approval by the lender’s Executive Board in the “coming days,” it said on Sunday.
An exact date for the IMF board meeting has not yet been set, Finance Minister Natalie Jaresko told students at the University of Banking in Kiev on Tuesday.
The government in Kiev needs the financial aid to replenish foreign-currency reserves as it seeks a return to growth next year after output contracted by 18 percent in the first quarter amid a separatist conflict in the country’s easternmost regions.
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