Is a financial crisis on the horizon? Why Ukrainian securities have fallen in price sharply
31 March 19:19
Ukrainian bonds have fallen to a record low amid disbelief in a truce between Russia and Ukraine. This was reported by Komersant ukrainskyi with reference to Reuters.
According to the media, this was the largest one-day decline in the last three years, reflecting the deterioration in investor sentiment.
Initially, after Donald Trump won the US presidential election, financial markets reacted with cautious optimism. Investors hoped that the new president could mediate a peace deal between Ukraine and Russia. This temporarily led to an increase in the value of Ukrainian debt. However, Trump’s subsequent statements and actions have raised concerns that any potential deal could be unfavorable for Ukraine, especially in matters related to its natural resources.
Financial instruments tied to Ukraine’s GDP, which provide payments to investors if the country’s economy grows, lost about 4 cents in value. This was the biggest drop since March 2022, when Russia launched a full-scale invasion. Additional pressure was exerted by the decline in the value of Ukrainian Eurobonds maturing in 2035, which fell by 3.6 cents, reaching their lowest level since November 2024.
The situation was also exacerbated by statements by US President Donald Trump, who accused Ukrainian President Volodymyr Zelenskyy of trying to abandon the critical minerals agreement. This contract provided for the development and extraction of resources that are strategically important for the energy security of Europe and the world. In addition, Trump threatened to impose secondary sanctions against countries and companies that buy Russian oil if Russia tries to disrupt his efforts to reach a truce.
Despite the fact that Ukrainian bonds showed a significant increase of more than 60% in 2024, the current setbacks in the peace talks and instability in the region have caused a significant decline in investor confidence. Financial analysts point out that Ukraine is facing a slowdown in economic recovery, and the lack of clarity on the peace settlement is only making the situation worse.
In addition, the war between Russia and Ukraine is increasing government spending, which is putting a strain on the budget and complicating public debt service. International creditors and financial institutions are closely monitoring the developments, waiting for further decisions from Ukraine and its Western allies.
Thus, the sharp decline in the value of Ukrainian bonds reflects not only the economic consequences of the war, but also broader geopolitical risks. To restore investor confidence, Kyiv needs to make progress in ceasefire negotiations and strengthen its economy with the support of international partners.
Read also: Ukrainian bonds fall in price amid disagreements between the US and Europe
What you need to know about Ukrainian bonds in 2025
In 2025, the Ukrainian bond market will remain dynamic and sensitive to both domestic economic changes and foreign policy developments. One of the key factors that influenced the country’s debt policy was the successful restructuring of the external debt in August 2024. Ukraine reduced its debt by $9 billion, which eased the burden on the budget and created opportunities to attract new investments.
Interest rates on domestic government bonds remain relatively high. Short-term hryvnia securities yield 13.5% p.a., while long-term bonds offer 17.5-17.75%. In the case of dollar-denominated government bonds, yields range from 4-5%, and for Eurobonds – 3-4%.
The Ministry of Finance of Ukraine expects public debt to fall to 97% of GDP in 2025, but the International Monetary Fund (IMF) is more conservative, suggesting that this figure could exceed 100% of GDP.
The geopolitical situation has a significant impact on the Ukrainian bond market. Any statements by international leaders or news about the progress of the war and negotiations can lead to sharp fluctuations in the value of Ukrainian securities. For example, recent statements about the possibility of a ceasefire and subsequent doubts about its prospects led to a drop in bond prices.
Despite the high risks, Ukrainian bonds remain attractive to investors due to their high yields. At the beginning of 2025, Ukraine’s dollar-denominated bonds yielded 7.8%, making them one of the most profitable assets among emerging markets.
