(Bloomberg) — One of the most popular emerging-market trades around Donald Trump\u2019s return to the White House is stumbling.<\/p>\n
Most Read from Bloomberg<\/p>\n
Ukraine\u2019s dollar bonds have handed investors losses of more than 10% so far in 2025, the worst showing among emerging and frontier markets, as the prospect of Trump making good on his promises and brokering a peace deal dim.<\/p>\n
That\u2019s a stark turnaround from their gains around the turn of the year when ceasefire bets made Ukrainian debt a top performer \u2014 almost doubling the price of some bonds since an August restructuring \u2014 and lifted markets across Eastern Europe.<\/p>\n
While investors aren\u2019t giving up on a deal, they\u2019re tempering their optimism.<\/p>\n
London-based hedge fund Frontier Road prefers exposure via corporate bonds, which it says are less vulnerable to geopolitical shifts. Bank of America Corp. still has an overweight recommendation on Ukraine\u2019s foreign debt, but warns of \u201cdownside risks\u201d as the fighting drags into its fourth year. Morgan Stanley sees hostilities persisting through 2025.<\/p>\n
\u201cThe market is back around levels seen before Trump\u2019s election,\u201d said Viktor Szabo, an investment director at Aberdeen Investments. \u201cThe promise to deliver peace a day after inauguration was met by the reality that Putin doesn\u2019t want peace.\u201d<\/p>\n
Trump floated the prospect of face-to-face talks between him, Russian President Vladimir Putin and Ukraine\u2019s Volodymyr Zelenskiy earlier in the month in Istanbul. Rather than attending in person, Putin sent a low-level delegation instead, with the result that only Zelenskiy went to Turkey.<\/p>\n
Trump said Sunday he was considering new sanctions against Russia, after Moscow launched a second night of deadly missile and drone strikes across much of Ukraine.<\/p>\n
For Eastern Europe more broadly, meanwhile, the reasons behind the U-turn in the Ukrainian bond market are why bourses from Warsaw to Budapest have posted some of the biggest increases worldwide.<\/p>\n
Curbing Support<\/p>\n
Initially, assets in the EU\u2019s east were buoyed by hopes of a peace deal bringing stability and more investment to the region.<\/p>\n
Subsequently, the possibility of Trump curbing military support for Europe and walking away from the peace process spurred Germany and other governments to action. The hundreds of billions of euros they\u2019ve pledged in defense spending lifted markets across Eastern Europe on wagers their economies will benefit.<\/p>\n
Story Continues <\/p>\n
The main stock indexes in Warsaw, Prague and Budapest have each handed investors returns in excess of 30% this year in dollar terms. And the Hungarian forint, the Czech koruna and the Polish zloty are at the top of emerging-market advances against the dollar so far in 2025, only eclipsed by the rebound in the Russian ruble.<\/p>\n
At the same time, Ukraine\u2019s extreme market U-turn is a reminder that geopolitical risks are creating pockets of turmoil. Elections in neighboring Romania and Poland are keeping investors on their toes, and there\u2019s the threat of wider fallout from the lack of a peace deal.<\/p>\n
Hungarian Prime Minister Viktor Orban \u2014 one of the most prominent Trump backers in Europe \u2014 on Friday cited delays in the Ukraine peace efforts as potentially causing lingering economic headwinds into 2026.<\/p>\n
The Kremlin has continued to douse hopes for progress. On Friday Russian officials rejected Trump\u2019s suggestion of hosting peace talks at the Vatican as unrealistic.<\/p>\n
Ukraine\u2019s dollar bonds were repeatedly among the worst EM performers on several days in the past week. Zero-coupon bonds due in 2035, whose future payouts are linked to Ukraine\u2019s economic performance, have been trading just above 50 cents on the dollar, down from around 70 cents in February, indicating deeper distress.<\/p>\n
Activity was subdued in several markets on Monday due to holidays in the UK and the US.<\/p>\n
\u201cThe main impact of the delays in peace talks has obviously been seen in Ukraine sovereign bonds,\u201d said Martin Bercetche, a portfolio manager at Frontier Road. \u201cAn investment in those bonds is predicated on some sort of ceasefire or resolution to the fighting.\u201d<\/p>\n
Key events to watch this week:<\/p>\n
Runoff in Poland\u2019s presidential elections on Sunday June 1<\/p>\n
Talks on the formation of a new Romanian government<\/p>\n
Central bank decision in Hungary and Uruguay on Tuesday, South Korea on Thursday<\/p>\n
–With assistance from Srinivasan Sivabalan and Zijia Song.<\/p>\n
(Updates with Trump comments, weekend attacks)<\/p>\n
Most Read from Bloomberg Businessweek<\/p>\n
\u00a92025 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"(Bloomberg) — One of the most popular emerging-market trades around Donald Trump\u2019s return to the White House is…\n","protected":false},"author":2,"featured_media":132978,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7654],"tags":[3662,58561,58559,32,18904,2000,299,58560,58562,2046,657,20729,1018],"class_list":{"0":"post-132977","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-ukraine","8":"tag-bloomberg","9":"tag-corporate-bonds","10":"tag-dollar-bonds","11":"tag-donald-trump","12":"tag-eastern-europe","13":"tag-eu","14":"tag-europe","15":"tag-frontier-markets","16":"tag-peace-deal","17":"tag-putin","18":"tag-ukraine","19":"tag-volodymyr-zelenskiy","20":"tag-white-house"},"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/132977","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=132977"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/132977\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/132978"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=132977"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=132977"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=132977"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}