By Laura Cochrane and Denis Maternovsky

Feb. 8 (Bloomberg) -- Ukraine’s bonds dropped to the lowest in a month and the hryvnia weakened after Prime Minister Yulia Timoshenko said yesterday’s vote was too close to call as opposition leader Viktor Yanukovych claimed victory.

The country’s dollar-denominated bonds due 2012 fell 0.4 percent to 91.323 cents on the dollar at 12:36 p.m. in Kiev, the lowest level since Jan. 14, lifting the yield to 10.606 percent from 10.397. The hryvnia weakened 0.5 percent for the first day in four, to 8.0700 per dollar.

Yanukovych, whose first presidential election victory was overturned by the courts after the 2004 Orange Revolution, led with 48.27 percent of the vote versus 46.10 percent for Timoshenko, after 95.42 percent of the ballots were counted, according to the Central Electoral Commission’s Web Site.

“Risks seemed to be skewed to the downside at the moment,” Andreas Kolbe and Koon Chow, strategists at Barclays Plc in London, wrote today in client note. “Depending on the final results, potential non-acceptance and further actions to challenge the results, we would view this election outcome as slightly negative for markets.”

A prolonged post-election battle would prevent the country from freeing up a delayed $16.4 billion emergency loan by the International Monetary Fund. The bailout was put on hold indefinitely after the country failed to pass the 2010 state budget and cut spending.

A victory by “pro-Russian” Yanukovych would benefit OAO Gazprom, OAO Lukoil, Evraz Group SA and other Russian companies with “substantial interests” in the country, UniCredit SpA said.

“A win by a relatively pro-Russian candidate would be positive for Gazprom, which could benefit from a reduction in the political component of annual negotiations over the gas price and transit tariffs to Europe,” Vladimir Osakovsky, UniCredit’s chief strategist in Moscow, wrote in a note to clients today.

Yanukovich would probably “keep the hryvnia weak,” wrote UniCredit economist Dmitry Gourov.

Ukraine’s benchmark PFTS index added 0.5 percent to 635.06, heading for its first gain in three days.

The cost to protect against a default by Ukraine was unchanged at 946 basis points, the highest in three weeks, according to credit-default swap prices from CMA Datavision in London. The contracts, which rise as perceptions of credit- quality deteriorate, are the fourth most-expensive sovereign contract globally behind Venezuela, Argentina and Pakistan, CMA data show. 

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