Ukraine Bond Rally Faces Uncertainty Amidst NATO Clashes
Emerging market investors are scrutinizing Ukraine's bond prospects as NATO allies grapple over the nation's future.
Negotiations between the US and Russia in Saudi Arabia, excluding Ukraine, and Europe's limited role raise concerns about a potential deal that may approve permanent Russian control over occupied territories. Timothy Ash of RBC BlueBay Asset Management views this as negative for Ukraine's bonds, as it diminishes the likelihood of a prompt war end.
Despite bullish expectations, Ukraine's bonds have recently experienced a decline. On Tuesday, dollar bonds were among emerging market underperformers, with zero-coupon notes due 2030 slipping 1.5 cents to approximately 59 cents.
Experts like Thys Louw of Ninety One UK Ltd. believe that as the bond rally progresses, the details of any peace agreement will become increasingly significant. Kieran Curtis of Abrdn Investments suggests that the bond market may be indifferent to the type of deal reached, as long as it halts conflict and related costs.
Ukraine's growth-linked securities have performed particularly well, with GDP warrants trading close to highs not seen since before Russia's invasion. However, Kaan Nazli of Neuberger Berman expresses skepticism about their long-term performance, emphasizing the importance of EU integration and the potential impact of a deal on those objectives.