By Libby George and Marc Jones
LONDON (Reuters) – Ukraine’s sovereign debt notched its largest losses this year on Thursday as some investors’ doubts grew over whether a potential ceasefire deal negotiated by U.S. President Donald Trump would boost the country’s economy.
On Wednesday, Trump called Zelenskiy a “dictator” and said he had to move quickly to secure peace or risk losing his country.
“Trump is not indicating in any form that the resolution will be a good one in any way for Ukraine,” said Daniel Moreno, head of emerging market debt with Mirabaud, an investment firm that does not currently hold Ukrainian debt. “The future of Ukraine looks a lot more murky than it did a few weeks ago.”
Ukraine’s GDP warrant fell by nearly 3 cents, the most since August 2023, before paring losses, while bonds traded down nearly 3.5 cents, the most since they were restructured late last year, before retracing.
Bonds that offered a higher payout if Ukraine’s economy outperformed expectations in the coming years have taken the largest hit, shedding some 7 cents since Friday. Still, the notes remain more than 14 cents above the level just before Trump’s re-election.
The slide underscores a weakening of previous optimism that a ceasefire was within reach – and would be an economic boon to Ukraine, paving the way for reconstruction and investment. Prior to this week, the bonds had notched impressive gains, and returned over 60% last year.
Viktor Szabo, a portfolio manager with abrdn, which is invested in Ukraine, said “risks have increased” over the impact of the Trump-led negotiations.
“It raises the odds that Ukraine will not accept whatever deal Trump and Putin come up with,” he said.
Kaan Nazli, a portfolio manager with Neuberger Berman, cautioned that trading had been thin, making bond prices more reactive to negative headlines.
“Ultimately this comes down to what Russia is willing to accept and they have been keeping their cards very close to their chest,” Nazli said, adding that Russia’s “maximalist” demands thus far made it tough for the market to form a clear view without knowing more.
Goldman Sachs said the full payout from GDP outperformance was “only plausible in the event of a near-term and lasting resolution to the war”.
The verbal jousting between Trump and Zelenskiy – and the exclusion of European and Ukrainian leaders from the talks between U.S. and Russian leaders – is feeding doubt over the lasting value of any potential ceasefire agreement.
“I think the path to peace and a beneficial reconstruction has been postponed till further notice…it is very unclear who, when and why anyone would want to invest in Ukraine,” Moreno said.
(Reporting By Libby George; Editing by Amanda Cooper and Hugh Lawson)
