Ukraine’s sovereign Eurobonds are a bargain despite risks
Ukraine’s sovereign Eurobond yields soared since mid-November when US sources first reported a build-up of Russian troops along its eastern border. We retain an overweight on Ukraine’s Eurobonds. We think markets are pricing in too high a risk of invasion and default.
What you will learn:
- We calculate that Ukraine’s benchmark bonds price in a 20% probability of default, but better outcomes for Ukraine are still on the table.
- We believe that Russia aims to capitalise on the inconsistencies in the current US and NATO position on Ukraine’s NATO membership.
- If a military operation takes place, it is more likely to be in a form of precision strikes on key Ukrainian military infrastructure.
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