February 19, 2014 / 3:36 PM / in 5 years

EMERGING MARKETS-Ukraine violence, Venezuela protests alarm investors

By Asher Levine and Natsuko Waki

SAO PAULO/LONDON, Feb 19 (Reuters) - Ukraine’s sovereign bonds plunged further on Wednesday as a renewed wave of violence hit the capital Kiev, while mounting unrest in Venezuela drove the price of its credit default swaps to near five-year highs.

Protesters poured into a central Kiev square on Wednesday, a day after at least 25 people were killed in demonstrations. Protests that began in November have hit the heavily indebted economy and drained the central bank of foreign reserves.

Russia is a key supporter of Ukraine President Viktor Yanukovich but has so far agreed to pay only $2 billion of a promised $15 billion aid package. Protestors are demanding Ukraine embrace a wide-reaching trade deal with the European Union, over Russia’s objections.

“We are worried that the interests of the actors are very hard to align,” Graham Stock, head of emerging markets sovereign research at Bluebay Asset Management, told an Emerging Markets Trade Association meeting late on Tuesday.

“If the street wins, there is no cash from Russia. If Russia wins, the street remains active.”

Prices for Ukraine’s dollar bonds fell across the curve, extending early losses. The 2020 dollar bond lost 0.41 cents of a dollar while 2014 bonds fell over 4 cents . The bond maturing in 2023 hit all-time lows of 77.58 cents.

The cost of insuring Ukraine’s debt for five years also shot up to 1,304 basis points, the highest since December 2009, according to Markit.

Bank of America Merrill Lynch said Ukraine has total maturing debt of about $9 billion this year, out of which Ukraine would have to pay the IMF about $3.6 billion, with the main share of payments due in the first half of 2014.

The country also has to pay $600 million in interest on its external debt in the first half and its $1 billion eurobond due in June. But foreign reserves are at an eight-year low of $18 billion after the central bank has spent about 8 percent of its reserves on currency intervention in January alone.

“In the absence of clarity in politics in the next few months, we see risks of liquidity problems,” BofA-ML said in a note to clients.

Several big institutional investors have held onto Ukraine during a recent bout of emerging market turmoil. U.S.-based Franklin Templeton funds owned around $200 million of the $2.6 billion 2017 bond and $300 million of the $1.25 billion 2023 bond as of Dec 31, according to Emaxx data.

The hryvnia currency fell to a fresh five-year low of 8.9 per dollar but dealers said trading was very thin.

Neighboring Russia saw its rouble hit an all-time low of 49.25 versus the euro after the finance ministry said it plans to buy nearly $6 billion in foreign currency to replenish one of its sovereign wealth funds.

The Hungarian forint also weakened, losing 0.85 percent to 313.04 per euro, a day after the central bank cut interest rates by a bigger-than-expected 15 basis points.

The benchmark MSCI equity index was nearly flat on the day, with strong Chinese stocks countering negative sentiment from Ukraine and Russia.


Student-led protests in Venezuela over issues including inflation, crime, corruption and product shortages continued to flare after security forces arrested opposition leader Leopoldo Lopez on Tuesday.

Investors reacted by driving up the cost of insuring Venezuela’s debt for five years to its highest since April 2009 . Debt prices have fallen to 63 cents on the dollar for some issues, levels often associated with a nation at or near default.

Still, Venezuela’s vast oil reserves have lent support, giving investors comfort they will be repaid.

Latin American currencies and stocks mostly weakened as investors awaited the release of the U.S. Federal Reserve’s January policy meeting minutes.

Chile’s peso posted its bigest decline against the dollar in over two weeks, the day after the central bank cut interest rates by 25 basis points and maintained its bias towards more easing as the top copper exporter’s economy runs out of steam.

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see )

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