Bond Market Insight-Eurobonds under crisis pressure

Last week, Europe\'s attention was on Italy, and thus the results of the 10-year bond auction could have a negative impact on the Eurobonds market and debt crisis. But, the European Central Bank bought some Italian bonds, pushing the YTM of 10-year bonds below the 7.0% mark. However, Ukrainian Eurobonds did not react significantly to this news.

Domestic bond market. Last week, banking sector liquidity significantly fell after its very high level on Friday the week before. The main reasons for liquidity falling could be Naftogaz\'s payment for imported gas, the FX market, and USD supply from grain exporters, and likely the not very substantial budget expenditures due to the low level of funds in the treasury account. At the same time, the MoF collected UAH0.7bn in demand for the USD-indexed bonds last Thursday. Likely, some banks are hedging their FX risks because they are expecting UAH devaluation very soon.

Eurobond market. Ukrainian Eurobonds weakened last week under the impact of European news flow but did not fall as significantly as a week ago. Likely, the Ukrainian Eurobonds reacted to the news in Europe with a few days\' delay, and the news on Italy\'s YTM rising above 7% did not have a significant impact on Ukrainian Eurobonds last week, as the news did that the ECB bought Italian bonds to push the YTM down. At the same time, the relative stability could be the reason for the MoF to continue with the preparation of the new Eurobonds issue this year.