(Bloomberg) -- Ukraine’s dollar bonds jumped as Donald Trump’s pledges to accelerate efforts to end to the war with Russia came into focus after he was reelected as US president.
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The country’s GDP warrants, a kind of debt security with payouts linked to economic growth, on Wednesday traded close to 74 cents on the dollar. Those levels were last seen before Russia’s full-scale invasion of Ukraine in early 2022.
Fund managers bought Ukraine’s dollar bonds in recent weeks as a Trump presidency started to appear more likely. The notes were among the best emerging market performers by percentage gained as of 9:25 a.m. in New York, according to data compiled by Bloomberg. Ukraine’s 1.75% notes due in 2035 rose 1.8 cents on the dollar to 47.3 cents.
“Bonds are reflecting the probability that the war could end sooner, rather than focusing on what shape that deal would look like,” said Thys Louw, a portfolio manager at Ninety One UK Ltd.
The rally in Ukrainian bonds stood out among emerging markets, where currencies and stocks sold off on expectations that Trump could introduce punitive tariffs on trade. Eastern European currencies were among the hardest hit, with the forint trading at the weakest since late 2022.
Major Obstacles
Major obstacles remain to bringing Ukraine and Russia to the negotiating table. Russian troops have been advancing in the grinding war and the prospect of finding common ground for peace talks remains distant. Ukrainian President Volodymyr Zelenskiy has pledged to keep fighting, but his military is heavily reliant on US aid.
“The war uncertainty remains the biggest question mark on the capacity of the Ukraine economy to support the restructured external debt without further adjustments required in the future,” said Carlo Morelli, senior portfolio manager at Azimut Investments SA.
Ukraine reached a deal with its international bondholders in August to restructure over $20 billion of Eurobonds. The GDP warrants weren’t part of that deal.
Aside from Ukraine, assets related to companies with exposure to the Russian market also gained. Shares in Raiffeisen Bank International AG, the biggest foreign bank still operating in Russia, rose as much as 10.7% in early trading. Turkish and Hungarian stocks were also among the best performers worldwide despite a wider emerging-market selloff.
Zelenskiy on Wednesday said Trump’s “peace through strength approach” to global relations could help end the conflict, adding that Ukraine relies on “continued strong bipartisan support” from the US.
Trump during his election debate with Vice President Kamala Harris in September said that he wanted the fighting to end, and would have the two countries’ leaders meet and work out a deal.
“I want the war to stop,” Trump said after being asked twice if he wanted Ukraine to win. “That is a war that’s dying to be settled. I will get it settled before I even become president.”
Gulf Remains
Both nations have so far insisted on ending the war on their own terms, with Ukraine’s president refusing any territorial concessions to Russia and Russian President Vladimir Putin refusing to give up plans to conquer the four Ukrainian regions Moscow claimed as its own in 2022.
Putin in July said that Russia takes Trump’s statements seriously that he has proposals to end the war quickly.
However, it remained unclear what immediate leverage Trump will have against Russia to force it to stop its offensive just when it started to make more gains, according to Ukrainian investment firm Dragon Capital. “Achieving a genuine ceasefire may therefore become a longer-than-expected process,” it said.
--With assistance from Volodymyr Verbianyi and Daryna Krasnolutska.
(Updates with investor quote, additional analysis.)
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