Tags: Ukrainian | Bonds | Stocks | Civil War

Ukrainian Bonds Slide With Stocks as Civil War Threat Escalates

Wednesday, 19 Feb 2014 11:43 AM

Ukrainian bonds suffered the worst selloff on record and stocks dropped as Poland warned its eastern neighbor is on the brink of a civil war after clashes in Kiev killed at least 25 people.

The yield on the government’s $1 billion of notes maturing in June increased 11.35 percentage points to 34.27 percent, an all-time high, at 4:26 p.m. in Kiev. The rate on bonds due in 2023 rose 93 basis points to 11.45 percent. Ukraine’s stock index lost 2.8 percent and the hryvnia, which is managed by the central bank, weakened 1 percent to 8.95 per dollar.

Investors are ditching assets of Europe’s riskiest borrower after President Viktor Yanukovych’s regime banned protests, vowing to use “all means” necessary to restore order. U.S. and European Union officials condemned the violence, while Poland, among nations calling for sanctions against Ukraine officials, said it had begun to accept refugees.

“The violent escalation of the political standoff brings nothing good to external debt, especially in the short term,” Vladimir Osakovskiy, a Moscow-based economist at Bank of America Corp., said in an e-mailed research note. “In the absence of clarity in politics in the next few months, we see escalating risks for Ukraine to service its debt.”

Ukraine, which is grappling with a record current-account deficit and foreign reserves at the lowest level since 2006, has $17 billion of liabilities coming due, excluding interest, through the end of 2015, data compiled by Bloomberg show. The yield on the 2014 note traded a record 23 percentage points above the rate on the debt maturing in April 2023.

‘Civil War’

Three-month non-deliverable forwards on the hryvnia increased 2 percent to 9.85 per dollar, reflecting bets for a 9.1 percent depreciation in the period, according to data compiled by Bloomberg.

Lawmakers in Ukraine’s Lviv region declared independence of Yanukovych’s government while protesters evicted the appointed governor and seized the local security service’s headquarters. EU foreign ministers will meet tomorrow to weigh “all possible options,” including “restrictive measures against those responsible for repression,” the bloc’s foreign policy chief, Catherine Ashton, said in an e-mailed statement.

“We may be witnessing the first hour of a civil war,” Polish Prime Minister Donald Tusk said in Warsaw.

The first deadly anti-government protests since Ukraine became independent of the Soviet Union in 1991 started in November when Yanukovych pulled out of a free-trade agreement with the EU, opting instead to pursue closer ties with Russian President Vladimir Putin, who opposed the EU deal.

The Russian government said two days ago it would resume a $15 billion bailout program put on hold last month, with plans to purchase $2 billion of Ukrainian Eurobonds this week.

“Money from Russia is not a solution,” Dmitri Barinov, a money manager overseeing $2.5 billion of debt at Frankfurt-based Union Investment Privatfonds, said by phone. “The situation is out of control. I fear there will be more blood.”

© Copyright 2017 Bloomberg News. All rights reserved.

   
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Ukrainian bonds suffered the worst selloff on record and stocks dropped as Poland warned its eastern neighbor is on the brink of a civil war after clashes in Kiev killed at least 25 people.
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2014-43-19
Wednesday, 19 Feb 2014 11:43 AM
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