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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?

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  • $\begingroup$ You seem to be mixing up local-currency (UAH) bonds and external hard-currency ones. Anyway, it really doesn't make sense to look at yields of debt trading at such distressed prices, 20-30c on a dollar. $\endgroup$
    – Dimitri Vulis
    Feb 2 at 17:53
  • $\begingroup$ @DimitriVulis Is it that the default risk of hard-currency bonds is higher than the domestic and that is the reason for the higher yield? There are some longer-maturity bonds whose prices are less distressed and which are more liquid on this exchange, where the same thing can be obvserved, I should have included some of those as examples. $\endgroup$
    – JMC
    Feb 2 at 18:18
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    $\begingroup$ Countries almost never default on local fiat currency denominated sovereign debt. Rather, they just print more currency. Such bonds are rates/fx instruments, not credit. On the other hand, bonds denominated in a foreign currency that the issuer can't print have credit risk, so their yield is currency risk-free interest rate + credit spread. $\endgroup$
    – Dimitri Vulis
    Feb 2 at 18:20
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    $\begingroup$ @DimitriVulis I see, that seems obvious in hindsight. Thanks. $\endgroup$
    – JMC
    Feb 2 at 18:21

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