Daily Insight-City of Kyiv Eurobond, ICU meeting with IMF, NBU takes next step towards tightening

The City of Kyiv council increased the peak level of its coupon rate for the new Eurobond. In May, 2011, the MoF approved the borrowing requirements for the City\'s budget in issuing the five-year Eurobond at a total volume of $300m and coupon rate not higher than 7.8%. But after the road show, which took place last week, the MoF and the City council increased this level to 9.6%. The new level of the approved rate is exorbitant, in our view. Its spread to the recently issued Ukraine-16 is 330bp. At the same time, the spread of Kyiv-15 to Ukraine-15 on Wednesday was 215bp; 115bp is a very high new issue premium, but the short period of time in which this was finalised could increase speculation that the final rate will be less than 9.6%, but close to this level. Spreads and yields depicted in the charts below show that after news of increasing the peak level, the spread increased to 260bp.