An interesting bond play
Since the Russian invasion of Ukraine, Ukraine's credit rating has plunged. Fitch has the rating of "C", which means that default is imminent with little prospect for recovery. Moody's gave Ukraine the credit rating of Caa3, which means the same thing as a C grade from Fitch.

S&P gives a slightly better credit rating for Ukraine at CCC+, which means substantial risk.

If Ukraine does successfully fend against the Russian invasion, I foresee its bonds surging higher in price. Many will see the high bond yields on Ukrainian government bonds and will capitalize on the opportunity since a victory would mean that the government will be able to better focus on economic recovery.

Assuming that Ukraine's fertile land is mostly kept intact despite the fighting, I can see the country relying more on grain exports to help pay down the debt. If not, then it will be more difficult for Ukraine to do business to help pay down the debt since it would take longer for non-agricultural industries to go back online after a complete shutdown due to war.

Is anyone investing in Ukrainian government bonds?
Joshua Simka's avatar
It had never crossed my mind to invest in an instrument like this! I appreciate your contrarian line of thought though. I just don't have any frame of reference for how to conceptualize the risk here. And the C credit rating doesn't inspire much confidence. If someone were interested, what's the easiest way to go about buying Ukrainian bonds?
Dissecting the Markets's avatar
@tomato I honestly don't know how one can buy Ukrainian government bonds. One would have to talk to their broker (hopefully it's not Robinhood) to see how that can happen. It's a high risk play, but if you're confident that NATO can provide Ukraine more arms to repel the Russian invasion, then it's a viable play.