Ukrainian Sovereign Debt - Ukraine Cancels Eurobond Issuance

Following the resignation of National Bank of Ukraine Governor Yakiv Smolii, Ukraine has decided to cancel its issuance of new Eurobonds. Yesterday, Ukraine had book-built for a new $1.75 bln Eurobond maturing in March 2033. The offering priced at a YTM of 7.3%, with an order book exceeding $7.5 bln.Today, it was reported that NBU Governor Yakiv Smolii had resigned. He attributed his decision to enduring "systematic political pressure" that prevented him from fulfilling his duties. The resignation of the NBU head due to "political pressure" could mark a significant change in Ukraine's credit profile, since central bank independence has been one of the main prerequisites for the country's cooperation with the IMF and its other international partners, and since the central bank's policy had been one of the more stable elements of the sovereign's credit profile. It is possible that the legal implications of the unfolding situation forced the decision to cancel the Eurobond placement. Volatility in Ukrainian assets may be elevated in the short term as investors closely monitor whether Kyiv can manage to guarantee the central bank's independence. This, rather than specific personalities, is what is important for Ukraine's international partners.