Ukraine issued a $1.25bn, eight-year Eurobond on April 26 to high demand, with total demand topping $3.3bn despite the country’s recent tensions with Russia, Reuters reported on the same day.

The bond will price for a yield of 6.875% as announced earlier, the lead manager told Reuters.

The country managed to cut the yield on the bond from the region of a low 7% when the sale started earlier the same day as demand increased from an initial $2.9bn.

The impact on Ukraine’s economy from the coronavirus (COVID-19) pandemic was milder than anticipated in 2020 and the economy is predicted to rebound strongly this year.

Ukraine’s economy contracted by 2.8% in January and February, compared to the first two months of last year, estimated the Ministry of Economic Development and Trade. Except for retail trade, all sectors were down. But consensus forecasts put Ukraine’s 2021 GDP growth at 4%.

Inflation is also a concern, but the National Bank of Ukraine (NBU) returned to aggressive tightening in March and is expected to continue to hike rates to bring inflation under control.

Ukraine's annual inflation will reach a 1.5-year high of 8% in March 2021, exceeding the central bank's forecast of 7.6%, said a monthly Reuters poll of Ukrainian analysts.

Analysts said consumer prices rose due to inflation imported from world commodity markets, notably wheat, corn, sunflower oil and crude oil.

Oleksiy Blinov, Alfa-Bank Ukraine’s Head of Research, said: “These changes in external prices are directly and indirectly transmitted to consumer inflation in Ukraine.”

The IMF has predicted that Ukraine’s consumer price index will end this year at 7.9%.

In related news the NBU amended rules on corporate issues of Eurobonds to improve conditions for issuers introduced the following amendments:

A €2mn annual cap was lifted off transactions to distribute income on and redeem eurobonds, as well as other issuer transactions for the purpose of placing such securities;

Foreign currency is allowed to be bought to be deposited in the issuer's own account with a Ukrainian bank until the eurobond liabilities mature.

"Ukrainian economy requires additional funds for development, more than ever," Yuriy Heletiy, NBU Deputy Governor, said as cited by Unian. "One of such sources are foreign borrowings."