President Volodymyr Zelensky’s Servant of the People Party has secured a comfortable majority in parliament after a resounding victory in the Rada elections on Sunday 21 July.
Zelensky’s party exceeded expectations. Its solid majority will enable him to focus on his own agenda and legislation without the need to rely on others, which could be positive for policymaking and implementation. Until now, recall that his policy intentions have been vague. Now the real work starts.
We upgrade our view on Ukraine US$ bonds (specifically ‘28s) to Buy from Sell, with a yield of 7.1% (z-spread 517bps). Markets have already anticipated a lot of the good news about Zelensky’s reformist zeal and ability to govern, but we think further spread tightening is possible.
We also reiterate our Buy on the GDP warrants, our strongest view in the Ukraine sovereign landscape. These are now indicated at c82 (mid). Our fair value is estimated at 135 at these lower discount rates (assuming 10%).