Weekly review: Greek uncertainty factor eased

Investors breathed a collective sigh of relief as the Greek austerity package was finally passed on Sunday, paving the way for a continuation of \"risk-on\" investing in the markets. Political and bureaucratic impediments in the talks between Greece, on one side, and the EU, ECB and IMF, on the other, however, are likely still to continue. In other news, this week, new details on Ukraine\'s sovereign Eurobond issue may emerge, as the country\'s borrowing window is likely to still be open. Hence, we expect Ukraine to tap the market with a US dollar Eurobond in this quarter.

Local currency. The external competitiveness of the local currency, the hryvnia, gained all last week until Friday. The UAH real trade-weighted index contracted (and the UAH added in terms of external competitiveness) by 0.9% from Monday to Thursday last week. The Greek factor of destabilisation of the financial markets globally is sure to calm down after a decisive, late-night vote on Sunday. Most likely, a risk-on attitude toward investing into riskier assets may be reinstated in the markets. And, the UAH is likely set to see another week of gains in terms of external competitiveness.

Domestic bond market. Last week, the domestic bonds market was marked by a significant increase in the banks\' portfolio and liquidity falling to its lowest level of this year, after Naftogaz\'s payments to Gazprom. As a result, money-market interest rates slightly rose, and then declined last Friday. The drop in liquidity also had a significant impact on the primary market, where the volume of demand significantly fell, and the majority of budget proceeds was seen from USD-denominated bonds.

Eurobond market. The MoF published its debt management programme for the 1Q12 and FY12, which slightly clarified its borrowing plans for this year, showing its plans to issue US$1.5bn of Eurobonds in 1Q12. But, the current market situation remained unstable, and as such, the issue will be very costly. The first window could be seen at the end of March, when the Greek debt situation will be more clear.
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