LONDON: Ukrainian dollar bonds surged on Tuesday after Russia said it would buy $15 billion worth of upcoming Ukrainian Eurobonds, allaying investor fears that the country would run out of hard cash.
"If this is a one-off, it is a big one and will bolster FX reserves likely doubling reserves," Tim Ash, an emerging markets strategist at Standard Bank, said in a client note.
Ukraine's foreign exchange reserves fell nearly $2 billion to $18.8 billion in November.
Ukrainian bonds have plunged since protests started late last month against a government decision to back out of a landmark trade deal with the European Union in favor of closer ties to Russia.
Investors doubted Ukraine could repay $7 billion in debts coming due next year without international support.
After news of the Russian deal, Ukraine's 2023 dollar bond was heading for its largest one-day gain since launch earlier this year.
It soared 6.5 points from Monday's close to a 2-month high above 90 cents on the dollar, according to Tradeweb. Ukraine's 2014 dollar bond rose 1.9 points to an eight-week high above 98.
Ukraine's five-year credit default swaps fell 11 basis points from Monday's close to 1,048 bps, according to Markit.
Russia also agreed to cut the price of gas supplies to Ukraine by about a third.
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