Paul Tudor Jones sees potential market rally after late October
Investing.com -- Citi analysts said it is taking partial profits on Ukraine’s 2034A bonds trade, as optimism surrounding a potential ceasefire has pushed prices higher.
While the market has reacted positively to signs of diplomatic progress, Citi warns that risks remain, particularly regarding Ukraine’s long-term economic recovery and security guarantees.
"The negotiations towards some kind of ceasefire appear to be progressing with a recovery in bond prices triggered by the news that Ukraine is prepared to sign the US minerals deal," Citi analysts wrote.
However, they caution that the potential deal could be fragile, creating opportunities for re-entry at better levels.
Bond prices have climbed over the past month, with the 2034A securities gaining more than seven points since early December.
Citi attributes this rise to increasing speculation about a potential détente between the US and Russia.
"With the news of a potential US-Russian ‘détente’ and a growing chance of some form of ceasefire priced in already, we believe that markets may start to focus on the potential growth trajectory and fiscal sustainability under a scenario of fragile peace with limited security guarantees," stated Citi.
The bank sees risks that any final deal could fall short of market expectations unless it includes clear security guarantees from the US.
Given the uncertainty, Citi suggests that better buying opportunities could arise in the future. "We believe there may be better levels to re-enter the curve," the analysts stated.
The firm also notes that without a stable peace agreement, Ukraine’s economic growth potential may remain constrained. "In such a scenario, with very limited US involvement, the potential GDP path is unlikely to overperform," Citi said.
Citi is exiting part of its position at a price of 60.25, as of 10 a.m. UK time on February 27, with a total profit and loss of 13.1%.