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.