Not 100 percent protection: what buyers of Ukrainian government bonds should consider
24 November 14:01
ANALYSIS FROM 
In October, Ukrainians’ investments in domestic government bonds (OVDPs) reached a historic high of UAH 106 billion. This once again confirmed that Ukrainians are aware of the benefits of this financial instrument and trust it. But what are the risks of buying government bonds and how likely is a default on these bonds – this is what
Commercial banks and the National Bank of Ukraine remain the largest holders of government bonds in Ukraine, but the shares of other investors are growing. Over the year – compared to October 2024 – the volume of investments of legal entities and individuals in government bonds increased by 27.5%. Ukrainians currently hold bonds worth more than UAH 106 billion, and legal entities – more than UAH 166.7 billion. In total, as of October 31, 2025, government bonds worth more than UAH 1.89 trillion are in circulation. This is the second largest source of financing for the state budget after international aid.
Profitable and patriotic
These two words can explain the interest in investing in domestic government bonds. The Ministry of Finance, reporting on the October maximum of purchases of domestic government bonds, clarified that out of the UAH 64.7 billion raised in October to the state budget through the placement of domestic government bonds, UAH 49.9 billion were hryvnia bonds with a weighted average yield of 16.5% per annum, and USD 355 million were foreign currency bonds with a yield of 4.06% per annum. Of course, if you look hard enough, you can find deposits in banks, at least in hryvnia, with the same rate. But the 23% that a bank deposit holder has to pay in taxes on interest income makes the answer to the question of what is more profitable as reasonably possible.
In addition, there are not many investment options in Ukraine today. Ivan Kompan, founder of First Kyiv Investment Club, points this out.
“Domestic government bonds are a really popular financial instrument. I agree with this. Where else to invest in Ukraine now? Unfortunately, there is nowhere else. Investing abroad is not allowed. Real estate is an even stranger investment, in my opinion, in a time of war and a long-suffering economy. People go where it is easier. Government bonds are really better than a deposit, because they are not taxed, they give higher yields, and for many people it is probably interesting,” the expert states.
And the Ukrainian Ministry of Finance also regularly reminds of the patriotic component of the government bond market, namely the opportunity to purchase “military bonds,” which directly replenish the country’s defense budget. This makes the choice in favor of government bonds even more obvious to many.
Guaranteed by the state
The repayment of funds invested in government bonds is guaranteed by the state and the Ukrainian budget. And government bonds are believed to be the financial instrument with the lowest credit risk in the domestic market. The protection is indeed reliable, but hardly one hundred percent, given both the permanent deficit of the Ukrainian budget and, say, problems with the repayment of Eurobonds.
Source
“This is because the state can default on domestic obligations only when it comes to a complete change of government and a change in the format of the entire country. An example is some revolutionary events, when the new government, for example, can say, “We renounce all previous obligations undertaken by the previous criminal government or something similar. In general, it is much easier for the state to imitate the hryvnia, create high inflation, but repay these bonds in any case,” the expert notes.
Ivan Kompan, founder of First Kyiv Investment Club, also believes that the state has enough tools and capabilities to ensure repayment. However, there is something investors should consider.
“There will be no default on hryvnia-denominated government bonds, as the government can always print a little more money and pay everything it is obliged to pay. But, you know, if money is printed, it will depreciate a bit. Therefore, the main risk for those who invest in hryvnia government bonds is that they will receive their money, but the exchange rate will be different. And since none of the Ukrainians calculate their long-term financial assets in hryvnia, but do it in dollars, euros, or francs, depending on their mood, it will be a minus,” the expert states.
And that’s not all the nuances
In Ukraine, dollar-denominated government bonds are promised the same protection from the state as hryvnia bonds. But the fact is that the Ukrainian state is not an issuer of the US currency. And this could lead to problems. Ivan Kompan, founder of First Kyiv Investment Club, explains.
“As for dollar-denominated government bonds, I think there is a greater risk here, because if something bad happens, there may be a default, because the state of Ukraine cannot print dollars, so they may simply be restructured, for example, or subject to a technical default. That is, there is still a certain risk of non-payment on time and in full. Let me remind you of the situation with Eurobonds, where there are problems with payments. And this concerns not only legal entities but also individuals. That is, it concerns everyone who invests in these securities,” the expert emphasizes.
Financial analyst Andriy Shevchyshyn agrees that the state’s ability to service dollar-denominated government bonds is somewhat limited. But not critically.
“In terms of the ability to ensure these payments and full repayment, the state’s capabilities are not so great. But there was no such thing as no payments on them. In the worst case scenario, payments can probably be made at some hryvnia equivalent at the official exchange rate,” the analyst notes.
He also states that the current demand for foreign currency government bonds is high, they are being bought up quickly, which proves the unambiguous profitability of the investment.
As an example, on November 18, the auction for the placement of domestic government bonds raised UAH 13.8 billion in the equivalent to the budget, and the largest amount of investment in the amount of USD 203 million came from the placement of foreign currency bonds. The largest amount of investments in the amount of USD 203 million came from the placement of dollar-denominated government bonds with a 1.5-year term and a yield of 4.01% per annum.
Author: Sergiy Vasilevich
