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Tuesday, December 3, 2013

Euromaidan may cost Ukraine a default



Against a wave of social unrest in Kiev the cost of default isurance on Ukrainian national debt has significantly grown. According to Bloomberg, default swaps on Ukrainian government securities in the next five years have risen by 100 points reaching 1071.

This is the highest level of assessment of compensation for insurance of non-payment of debt in the world after Argentina and Venezuela, according to ITAR-TASS.
The level of Russia's similar insurance on eurobonds as of December 2, was six times as low and stood at 173,8 points.
The probability of default on Ukraine's government securities in the coming five years the investors assess as 53,3%.
«1071 points mean that when buying Ukrainian bonds $10 mln worth plus default insurance, investors will have to pay 1,071 mln», - bond market analyst at Raiffeisen Bank Denis Poryvay said.
By this fashion, in five years the total amount of insurance proceeds will exceed $5,3 mln, or, in other words, will amount to over a half of the total bond cost.
The profitability of Ukraine's 10-year state securities in conversion to US dollars has risen on Monday up to 10,6%.
The profitability of the dollar bonds with 2014 redemption has gone up to 19% - the maximum level since these papers had been issued in August of 2012.

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