0:28 19 January 2022
Ukraine bonds sink into distress
The market is afraid of an armed conflict in Ukraine. The risk of Russia invading this country has weakened the Ukrainian bonds denominated in dollars. The so-called risk premium, i.e. the difference in yields between Ukrainian bonds and US securities considered to be safe, increased to 1,000 points, the level recorded during the annexation of Crimea by Russia.
Less than a dozen countries in the 70-plus strong index have quadruple-digit spreads, including Venezuela, Zambia, Lebanon, Sri Lanka, and Ghana which are all either in default or deep debt distress.
"The market has to price in some kind of probability of Russia invading," Viktor Szabo, an asset manager abrdn, said.
He noted as well how the concerns had suddenly hit home for investors in recent days.
Russia denies it plans to attack Ukraine but says it could take unspecified military action unless its demands – including a promise by the NATO alliance never to admit Ukraine.
