Bonds: Eurobonds continue to rebound

Обзор облигаций 29.10.2014 Following the market's positive response to preliminary election results in Ukraine as spreads tightened significantly on Monday, yields continued to decline even further, following US Treasury movements. As US Treasury YTMs rose yesterday to 1.52% and 2.30%, respectively, for 5-year and 10-year bonds, spreads tightened to the range of 768-1,632bp as the Ukrainian Eurobond yield curve adjusted to the range of 9.97-16.71% yesterday. UKRAIN 6.875% '15 declined 37bp to 16.71%, UKRAIN 9.25% '17 remained steady at 13.07%, UKRAIN 7.95% '21 declined 2bp to 10.18%, while UKRAIN 7.80% '22 and UKRAIN 7.50% '23 rose 3bp to 10.28% and 9.97%, respectively. The 5-year CDS slid to 1,183bp. Investment implications: This improvement was only a reaction to the election results. Without a significant improvement in Ukraine's economy, yields should remain high and not acceptable for new issues. The situation in eastern Ukraine also has a negative impact on markets based on decreased ability to pay.