With the Ukraine’s $5bn stand-by agreement (SBA) with the International Monetary Fund (IMF) in limbo, the Ministry of Finance has turned to the domestic bond market to build up reserves ahead of a year of heavy debt redemptions.
Yields on local hryvnia debt have been hiked to between 10% and 12% to entice investors back into the market after a sell-off in 2020, due to multiple shocks. And foreign purchases of Ukrainian government bonds are returning to their peak levels of late 2019, reports Dragon Capital.
Over the last month, foreign purchases totalled $526mn, “close to peak monthly inflows of $560-610m in September and December 2019,” Dragon wrote as cited by UBN.
“Recent appreciation pressure on the hryvnia (+1.4% w/w) is likely to support interest in local bonds. We expect yields on medium-term hryvnia debt to remain close to current levels in the coming months unless an upsurge in foreign demand drives them lower.”
The government is due to pay off some $16bn of debt this year, with a peak payment of $11bn in September. Economist worry that without a working IMF programme the government will not be able to meet its obligations.