Ukrainian dollar bonds fell by 10%: investors are losing faith in a quick peace
Since the beginning of 2025, Ukraine's dollar bonds have brought investors more than 10% losses, which is the worst performance among emerging and frontier markets. Bloomberg writes about this.
Back in late 2024, the situation was the opposite, amid expectations that Donald Trump would win the US presidential election and fulfill his promises to cease fire and conclude a peace agreement.
Thus, at the end of last year, Ukrainian dollar bonds were rapidly increasing in price. Some of them almost doubled in value after the restructuring in August.
But now investors have begun to doubt that Trump will be able to quickly achieve peace between Ukraine and Russia.
Although he proposed holding a personal meeting with Vladimir Putin and Volodymyr Zelensky in Turkey, the Russian side sent only a low-level delegation, and Putin did not arrive.
Against this backdrop, some investors – such as London-based hedge fund Frontier Road – have switched to Ukrainian corporate bonds, which they believe are less vulnerable to political change.
Bank of America continues to recommend holding Ukrainian government bonds, but warns of "downside risks" as fighting continues into its fourth year. Morgan Stanley does not expect the war to end in 2025 at all.
Some Ukrainian bonds, for example, "zero" bonds maturing in 2035, which depend on future economic performance, are trading just above $0.5 per dollar – in February they were worth about $0.7.
Meanwhile, other Eastern European markets are showing growth, with the Warsaw, Prague and Budapest stock indices bringing investors more than 30% in dollar terms since the beginning of the year.
The national currencies of Poland, the Czech Republic, and Hungary also strengthened and topped the list of leaders among emerging markets.
This was due to preparations for a possible reduction in military support from the United States. This prompted European countries, including Germany, to promise massive increases in defense spending, which supported the region's economies.
- On April 2, 2025, US President Donald Trump announced the introduction of new tariffs, which caused strong fluctuations in global stock and bond markets.
- Japanese investors have sold off foreign bonds. U.S. bonds have also seen a significant sell-off, with 10-year bond yields rising the most since 2001.