Why Ukrainian Bond Yields Can Exceed Published Yield Curves

Summary

The document raises a discrepancy between Ukrainian government bond yields to maturity calculated from individual bonds traded on a German exchange and lower yields shown by published yield curves. The author reports bond-level estimates ranging from roughly eighty percent to several hundred percent, while the cited curve is inverted and shows much lower rates. They suspect differences in annualization conventions or the distinction between par yields and yields to maturity, and ask whether coupon effects, taxes, or the trading venue could account for the gap.

The document offers observations and hypotheses rather than a resolved analysis. It does not provide bond terms, calculation details, market dates, curve construction methods, or an answer establishing the cause. Those omissions prevent checking whether the yields are directly comparable. It is useful as a prompt to examine cash-flow conventions, bond prices and accrued interest, curve methodology, and market liquidity before drawing conclusions from headline yield comparisons.

Key ideas

• The document compares individual Ukrainian bond yields with rates on published yield curves.
• It suggests annualization conventions and par-yield versus yield-to-maturity differences as possible explanations.
• Coupon effects and taxation may affect yield comparisons for non-par bonds.
• The document asks whether German secondary-market pricing differs from the domestic market inputs behind the curves.
• It provides no data or answer sufficient to identify the cause of the discrepancy.

Tags

# YTMs of Ukrainian Bonds are much greater than published yield curve suggests


# YTMs of Ukrainian Bonds are much greater than published yield curve suggests












I noticed that the yields to maturity of Ukrainian government bonds seem to be much greater (multiple times greater in some cases) than the avaialible yield curves suggest, and I'm trying to understand this discrepancy.

This is a source for the yield curve: http://www.worldgovernmentbonds.com/country/ukraine/ (inverted yield curve, ~46% to ~24%) Others seem to give the same data.

However, when I check individual bonds on the Frankfurt Exchange (I am located in Germany) the computed YTM's are multiple times greater:

Example 1 (~80%))

Example 2 (150-300% depending ask/bid)

Example 3 (~112%))

As you can see, the yields are considerably higher than the yield curve suggests, more in line with the yield curves given for 1 year ago.

Through some trial-and-error with a YTM calculator, I think I figured out that the yields given by the site seem to be YTM figures expressed as an annual equivalent rate and I'm assuming the yield curves are par yield curves. I know of the "Coupon Effect" caused by non-flat interest curves and taxation causing the "YTM model"'s assumptions to fail and causing different YTMs for non-par-bonds. However, can this really explain such a huge difference?

Is it somehow caused by me looking a the German secondary market whereas the yield curves might be based on the domestic market?

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.