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. Last Updated: 07/27/2016

Banks See Ukraine Rally Continuing

The cost to protect against a default by Ukraine is set to fall to the lowest level since before Lehman Brothers’ collapse, as the world’s best debt and equity rally has further to run, Dragon Capital and UniCredit say.

UniCredit, Italy’s biggest bank, expects a decline to less than 500, below the level before the collapse of New York-based Lehman froze world credit markets.

Stocks surged 64 percent and government bonds gained 21 percent in the first quarter, topping 267 equity and bond indexes tracked by Bloomberg, as newly elected Ukrainian President Viktor Yanukovych pledged to resume cooperation with the International Monetary Fund on a stalled $16.4 billion bailout. The Washington-based lender froze its loan program last November as political infighting prevented parliament from agreeing on a budget.

“As long as the good news keeps coming in, I would expect the rally to continue,” said UniCredit economist Dmitry Gourov in Vienna. “The markets are normalizing after the political and economic turbulence of the past 18 months. Before then they were overshooting.”