Part 1 valued a Kyiv apartment the way an analyst values a bond: rent as coupon, price as par, and a net yield of 4.35% against 5.51% for investment grade corporate credit. On that arithmetic the apartment loses.
The arithmetic is right. The framing is the problem — because it silently treats a bond as risk-free and an apartment as an inefficient bond, and in September 2026 both halves of that assumption are wrong.
What the credit market is actually paying for risk
The yields in Part 1 look generous. The spreads behind them do not.
| Measure | Level, 3 September 2026 |
|---|---|
| Investment grade corporate index yield | 5.51% |
| Investment grade option-adjusted spread | 0.81% |
| High yield index yield | 7.15% |
| High yield option-adjusted spread | 2.65% |
| 10-year Treasury | 4.77% |
| 10-year inflation-protected real yield | 2.42% |
An investment grade spread of 81 basis points means the market is charging less than one percent a year to take corporate default risk over Treasuries — a level not sustained since before the financial crisis. High yield at 2.65% is being paid to lend to companies that, by definition, may not repay.
Nearly all of the 5.51% is not credit compensation at all. It is the government yield, and it comes with the government yield's exposure: duration. On an index with roughly seven years of duration, a one percentage point rise in yields costs about 7% of principal — two years of coupon, gone on a repricing, which is exactly what the long end delivered this summer when the 30-year touched 5.31%, its highest since 2007.
The FOMC meets on 15–16 September with markets pricing roughly a 58% probability of a 25 basis point hike, not a cut. A bondholder is being paid 0.81% to carry corporate risk into that meeting.
An apartment is a real asset; a bond is a nominal promise
The coupon is fixed in the currency it was written in. Rent is not: it resets with every lease.
That distinction is invisible in a one-year comparison and dominant over ten. The 10-year TIPS real yield is 2.42% — that is the honest, inflation-adjusted return on a Treasury today, before tax. A hryvnia OVDP paying 15.5% against an NBU inflation forecast near 10% is a real 5%, and it is a real 5% only for as long as inflation behaves and the hryvnia holds.
The apartment carries no such promise, and needs none: it is priced in square metres, and square metres are re-priced by the market every year. Over the last twelve months that mechanism did exactly what it is supposed to do — the median Kyiv one-bedroom rose about 5% in dollar terms while rents fell. The asset absorbed the shock; the income line took it.
Sovereign risk cuts both ways
The comparison in Part 1 credited Ukrainian government bonds with a tax-free 15.5%. It did not price what stands behind them: debt at roughly 122% of GDP, a budget financed by external partners, and a country at war. Ukraine restructured its external commercial debt in 2024, and bondholders took a substantial writedown by agreement of a creditor committee.
That is the difference in kind between the two assets. A sovereign obligation can be rewritten by the issuer. An apartment cannot be restructured by anyone. A corporate bond in default recovers something in the region of 40 cents; the building does not go to zero, because someone still needs to live in it.
The leverage nobody offers a bondholder
The strongest argument for property is not the yield. It is the financing.
Ukraine's єОселя programme lends at 3% to serving military, medics and teachers, and at 7% to everyone else within its criteria. Against a gross rental yield of 7.36%, a 7% mortgage is roughly break-even on carry — and roughly break-even carry on an appreciating asset bought with someone else's money, amortised by a tenant, in a currency losing 2–4.5% of value a year, is a very different proposition from an unlevered 4.35%.
At the subsidised 3% rate it is not close. No broker will lend a retail investor at 3% to buy corporate bonds.
The coupon cannot be renovated
This is the asymmetry no fixed income instrument has: the owner can act on the asset.
A $6,000–8,000 renovation moves a Kyiv one-bedroom out of the median rent band. Turning $420 a month into $550 adds roughly $1,560 a year on $7,000 spent — an incremental return north of 20% on the incremental capital, and it lifts the resale price at the same time.
The same logic applies at purchase. The median is not the market: one-bedrooms run from $43,500 in Desnianskyi to $152,000 on Pechersk. Buying 15% below the district median, which is ordinary competence in a slow market, changes the entry yield from 7.36% to about 8.7% before anything else is done. Nobody buys a corporate bond 15% below its market price.
Taxes favour the building on exit
Part 1 counted the tax on rent and stopped. The exit matters more.
A first sale of residential property in a calendar year, held for over three years, is taxed at 0% in Ukraine — no income tax, no military levy. Ukrainian corporate bond coupons are taxed at 18% plus the 5% levy. So the two assets are taxed in mirror image: the bond is taxed on its income and the apartment is taxed on its income, but the apartment's capital gain — the part that compounds — can be realised tax-free, and the bond has no capital gain to realise.
How I read it
Part 1 is honest about the income and blind to everything else. The apartment yields less, and in exchange the owner gets an asset whose value resets with inflation, that cannot be restructured by an issuer, that a state programme will finance at 3–7%, that responds to work, and that can be sold tax-free after three years.
The bond gives 5.51% for taking corporate risk at 0.81% of compensation, into a meeting where the market thinks the Fed hikes.
Neither of these is the answer. Part 3 puts both cases against each other and works out where the line actually falls — by horizon, by leverage, and by currency.