IMF decision should support Ukraine’s bonds; impeachment hearings suspended in Brazil

By Christine Van Dusen

Atlanta, Dec. 9 – Ukraine’s bonds received some attention on a Wednesday that also saw Latin American spreads open tighter on volatile trading, then close at their widest levels of the day as political turmoil in Brazil took a toll.

This week the International Monetary Fund eased its lending-into-arrears policy for countries that default on debt held by other sovereigns, a move that is expected to benefit Ukraine, which owes $3 billion on Dec. 20 to Russia and may not be able to pay in time.

Against this backdrop, sovereign bonds from Ukraine have experienced “some weakness” so far this week, said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

“Not much activity, but lower offers in quasi-sovereign banks,” he said. “No joy in the corporates land as the whole metal and mining complex gets marked down in search of bids and clearing levels.”

Brazil was trading very well during most of the session, then faltered after the Supreme Court suspended the impeachment proceedings for President Dilma Rousseff, who has been accused of breaking budget laws.

That – plus the news that Moody’s Investors Service put the sovereign’s rating under review – sent Brazilian five-year credit default swaps spreads out to 460 basis points from a tight of 450 bps, the trader said.

They later closed around 452 bps.

In deal-related news, African Development Bank launched a $500 million issue of green bonds due in December of 2018 at mid-swaps plus 14 bps, matching price talk.

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