Ukraine raises USD 1.25 bln from 10-year Eurobond at 7.5% yield

Обзор облигаций 10.04.2013 The Ukrainian government placed a new Eurobond with its maturity in 2023 and a 7.5% coupon rate, according to news reports on Apr. 10. The total amount raised from the placement is USD 1.25 bln. The previous Eurobond placement was a 10-year note with a 7.8% coupon in November 2012, which is now trading at a 7.16% yield. Alexander Paraschiy: The placement is a positive development as it ensures no deterioration in Ukraine’s international currency reserves in the near future. Recall that Ukraine has to repay about USD 1.35 bln to the IMF within the next five weeks. On the flip side, the placement is a signal that the Ukrainian government isn’t counting on an IMF loan any time soon. An IMF mission will conclude today its two-week visit that has been aimed at renewing cooperation. In this context, the Eurobond placement was a smart move, being carried out before the official results of the IMF visit were announced. It worked out well, with the IMF mission sitting in Kyiv and QE3 fueling the market’s risk appetites. It looks as though renewed IMF cooperation isn’t a priority for Ukraine, at least for the next month (which seems like a planning horizon for decision makers). The key risk now is Ukrainian officials making some careless moves in their talks with the IMF and spoiling the deal, which might increase risks for the local currency. Despite a smooth 2013 economy so far, there was no fundamental improvement in macro indicators, particularly the current account deficit. Therefore, the ForEx market remains very fragile.