Ukraine bonds rally on preliminary US critical minerals deal

Updates prices, adds analyst quotes and context throughout

By Karin Strohecker

LONDON, Feb 26 (Reuters) - Ukraine's international bonds rallied on Wednesday after Kyiv said it had a "preliminary" deal on critical mineral resources with Washington seen as central to its push to win support from President Donald Trump's administration.

The dollar-denominated bonds added as much as 1.4 cents on the dollar, Tradeweb data showed. The 2029 maturity, the biggest gainer, was being bid at 72.35 cents. XS2895055981=TE

The deal foresees that Ukraine hands revenue from some of its mineral resources to the United States and comes before an expected trip to Washington by President Volodymyr Zelenskiy on Friday. Trump is seeking a quick end to Russia's war in Ukraine, with U.S.-Russia talks that have so far excluded Kyiv set to continue on Thursday.

Trump has cast the deal as a repayment for billions of dollars in aid to Kyiv during the war. Zelenskiy has been asking for security guarantees in exchange for the mineral rights, but it is unclear whether those demands have been successful.

"The new deal appears less onerous for Ukraine than the initial proposal," said Piotr Kalisz at Citi, adding that the document offered no security guarantees to Ukraine but the authorities in Kyiv assumed a bigger presence of U.S. interests in the country can act as a stabilizing factor.

"It seems also that signing such a deal could potentially help alleviate diplomatic tensions between Ukraine and the U.S.," Kalisz added.

Ukraine's bonds, which were launched as part of last year's August restructuring deal, have been on a rollercoaster in recent days.

The debt suffered sharp declines after Trump last week falsely called Zelenskiy an unpopular "dictator" who needed to cut a quick peace deal or lose his country. The Ukrainian leader said the U.S. president was living in a "disinformation bubble".

The bonds recovered some of those losses in recent days and the latest gains have put some maturities close to record highs hit in mid-February.