Ukraine bonds staged October rally as Trump prospects weighed
LONDON, Nov 1 (Reuters) -Ukraine's international bonds rallied sharply in October as markets placed bigger bets on the chance of a second Donald Trump presidency following U.S. elections next week, with some believing it may result in a quicker end to conflict.
The country's dollar-denominated bonds, which launched in early September after the country's debt restructuring, added as much as 6 cents last month, according to Tradeweb data.
The bond maturing in 2036 enjoyed the biggest price rise in October to peak at 49.47 cents on the dollar, though gains were broad based before most maturities retraced in the past week.
"Ukraine's been pretty correlated with Trump's politics," said Edwin Gutierrez, portfolio manager with abrdn, adding that some perceive a Trump win as making an end to the conflict more likely. "And in the past week, as you've seen the Trump trades, people have been taking profits on that...you've seen consolidation in Ukraine."
The Nov. 5 U.S. election is polling so closely between Trump and Vice President Kamala Harris that most observers view it as a tossup between the two. Markets are gearing up for a wild ride as a result.
But as betting market odds shifted in Trump's favour in recent weeks, some traders placed bets on a stronger dollar and rising U.S. treasuries.
Erik Meyersson, chief emerging markets strategist with SEB Bank in Stockholm, said the bets on Ukraine's bonds were linked to the belief in some quarters that Trump could, as promised, quickly end the conflict.
"If there was a peace deal, even if it would be on terms that would be detrimental to Ukraine's economic future, it might still be perceived as a relief to markets," he said.
A cessation of hostilities, he added, could allow the government to "start repairing fiscal balances and budgets."
Still, Meyersson warned of significant risks around the trade, including that forcing a peace deal could be more complicated than the Trump team suggests -- and that any cut to U.S. financial support to Ukraine would be bad for bondholders.
"That could have the opposite effect on Ukraine bonds," he said.
Reporting by Karin Strohecker and Libby George, editing by Daren Butler
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