LONDON, Dec 4 (Reuters) - Ukraine's debt yields traded around record highs on Wednesday as ministers in Kiev successfully passed protester blockades to reach a cabinet meeting, while broader emerging stocks hit three-week lows on worries about a withdrawal of U.S. stimulus.
Ukrainian assets have fallen sharply since the biggest political protests in almost a decade erupted after the government's rejection last month of a landmark trade deal with the European Union.
"We are seeing the gradual fall of a second curtain, call it the 'glass curtain', which continues to cover many years of electorate discontent with various governments in a country split in its desire to move east or west and placing it in the middle of a tug-of-cold-war between the EU and Russia," said Simon Quijano-Evans, head of emerging markets research at Commerzbank, in a client note.
Amid the political turmoil, and the juggling of different foreign backers, investors are worried that Ukraine's dwindling currency reserves will eventually make it hard for the country to repay its dollar debts.
The state and companies already face a struggle to repay $7 billion of debt maturing next year, while doubts are growing as to how long the central bank's meagre reserves can stave off a currency collapse.
Ukraine's 2020 dollar bond rose slightly to yield 11.2 percent, just off a record high set on Tuesday, while the dollar bond due 2023 was unchanged around another record high of 10.6 percent.
Ukraine's five-year credit default swaps rose 9 basis points from Tuesday's close to 1,097 bps, but stayed below near-four-year highs above 1,100 bps set in the previous session, according to Markit.
Ukrainian stocks fell nearly 1 percent to three-week lows and have slumped 7 percent in the past 9 days.
The hryvnia edged off the previous day's four-year lows of 8.25 per dollar, with one-year forwards at 9.83, pricing in a slide of 16 percent from current levels.
The mood on many emerging stock markets was glum ahead of U.S. GDP data on Thursday and employment numbers on Friday, seen as a possible trigger for the Federal Reserve bringing forward its first move to rein in economic stimulus.
The MSCI emerging equities index, which has benefitted heavily from the flood of cheap money flowing from the Fed, fell 0.44 percent to three-week lows, though Shanghai shares closed at their highest in three months on optimism about the pace of reforms in China.
Emerging European currencies were steady to slightly weaker.
Data on Wednesday showed South Africa's HSBC manufacturing PMI for November came in at 51.6, slightly above October levels. The HSBC services sector index eased in China to 52.5, but rose in Russia to 52.9.
Emerging sovereign debt spreads tightened by 3 bps to 358 bps over U.S. Treasuries, and sovereigns continue to take advantage of relatively low yields to issue debt.
Gabon set price guidance on a 2024 amortising dollar bond in the 6.5 percent area, plus or minus 12.5 bps, according to one of the lead managers. Gabon is launching the bond alongside an exchange offer of part of its 2017 bond.
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