Ukraine | 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.

Topics: Risk, United States, Europe, Risk assessment, Risk evaluation, GDP, Macroeconomics, Infrastructure, Outlook, Russia, European Union, Ukraine