Ukraine’s Eurobonds Snap Decline as Templeton Praises Government
Ukraine’s dollar debt due in 2023
gained for the first time in four days after Franklin Resources
Inc., the biggest holder of the notes, said it was encouraged by
the government’s policies to deal with an economic crisis.
The yield on bonds due April 2023 fell seven basis points
to 9.47 percent by 12 p.m. in Kyiv, according to data compiled
by Bloomberg. Sovereign debt maturing June 4 rose 0.61 cents to
97.53 cents on the dollar.
Franklin Templeton Investments (BEN) boosted holdings of
Ukrainian bonds in the fourth quarter even as the nation faced
insolvency and civil unrest, leading to the installation of a
new government in February. While Ukraine remains at the center
of the biggest confrontation between Russia and the U.S. since
the Cold War, Templeton is focusing on its “long-term
potential” and the “encouraging” measures of the new
administration, the fund manager said on its website yesterday.
“The current government has done an exceptional job,”
said Michael Hasenstab, who oversees Templeton’s $190 billion
global bond group, which has amassed $7.3 billion in Ukraine’s
debt and increased its holding in the fourth quarter, according
to data from the asset manager’s most recent filings compiled by
Bloomberg.
The policies of Prime Minister Arseniy Yatsenyuk’s
government are “tackling not just the short-term issues but
really setting the stage for Ukraine to flourish over the next
five to 10 years by putting in place very difficult, but very
important, structural reforms,” Hasenstab said in a video
filmed in Kyiv on April 5 and posted on the website.
Bailout Agreement
Ukraine, which faces more than $9 billion in debt payments
this year, agreed to cut its budget deficit to 2.5 percent of
gross domestic product by 2016, raise retail energy prices,
maintain a flexible exchange rate and address banks’ bad loans,
the International Monetary Fund said in a March 27 statement.
The IMF was announcing a deal that was expected to unlock
as much as $27 billion in aid once Ukraine takes steps to
stabilize the economy. The deficit was 4.4 percent of GDP in
2013, the Finance Ministry said last month.
Bonds declined yesterday after Energy Minister Yuri Prodan
said yesterday Ukraine won’t import Russian gas until a price is
agreed and Russian President Vladimir Putin told his government
to draw up a plan to replace Ukrainian imports.
Russia has ratcheted up pressure on its neighbor after
annexing Crimea last month, ignoring sanctions from the U.S. and
European Union, massing troops along its eastern border and
raising gas prices.
The hryvnia plunged 4.3 percent today to a record low of
12.70 per dollar, bringing the decline this year to 35 percent,
the worst performance among global currencies tracked by
Bloomberg.
“The unstable situation in eastern Ukraine, yet-to-be-received external financing and a devaluing national currency
all increased the vortex of negative sentiment,” Alexander Valchyshen and Taras Kotovych, Kyiv-based analysts at Investment
Capital Ukraine LLC, wrote in an e-mailed report today.
To contact the reporters on this story:
Andras Gergely in Budapest at
agergely@bloomberg.net;
Boris Korby in New York at
bkorby1@bloomberg.net
To contact the editors responsible for this story:
Brendan Walsh at
bwalsh8@bloomberg.net
Chris Kirkham, Matthew Brown