Ukraine’s international bonds are heading for their biggest weekly gain this year and analysts at Bank of America Corp. see more upside ahead.
(Bloomberg) — Ukraine’s international bonds are heading for their biggest weekly gain this year and analysts at Bank of America Corp. see more upside ahead.
Bank of America affirmed its overweight recommendation for Ukraine’s external debt, saying that better-than-expected economic output data are set to improve debt ratios. The war-torn country is also benefiting from more robust foreign aid flows, accumulation of currency reserves as well as “reduced risk of ‘worst-case’ conflict scenarios,” according to a research note Friday.
Ukrainian bonds of varying maturities made up all 10 of the best-performing sovereign bonds in emerging markets on Thursday. The 2024 note was up 5.6 cents on the dollar this week to more than 30 cents as of 10:55 a.m. in London on Friday, the biggest weekly increase on record to the highest since August 2022.
“The ongoing conflict clearly remains the key source of pressure on market valuations,” said Vladimir Osakovskiy, a strategist at Bank of America. “But Ukraine investment has had a number of positive triggers this year, which may increase the likelihood of more market-positive scenarios in the eventual debt restructuring.”
Key observations from Bank of America report:
- The bank updated macroeconomic forecasts for Ukraine to account for stronger-than-expected nominal GDP data for 2022
- “Much higher nominal GDP in 2022 also creates the base for much a stronger debt-to-GDP profile”
- “Apart from stronger macro, external assistance is evolving into a structured long-term program aimed at post-conflict reconstruction”
- “Resilient macro supports our view that the restructuring of commercial debt will likely be focused on maturity extension and a grace period vs a nominal haircut”
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