Fears of default by Ukraine's capital Kyiv on Monday, July 5, cast a shadow over good news on the Ukraine's agreement with an International Monetary Fund mission, underscoring investors' persisting concerns about the ex-Soviet republic's finances.

The capital city government noted on Monday it was able of repaying its debt following local media reports of restructuring plans. On Saturday, Ukraine and an International Monetary Fund mission concluded an agreement on a new 15 billion USD facility.

"The news around the potential restructuring of the capital city dented sentiment towards Ukraine and the sovereign credit could not decouple entirely from these developments," Barclays Capital admitted in a note.

"The breakthrough in the International Monetary Fund negotiations announced over the weekend sparked an initial spread tightening, which quickly fizzled out as the city of Kyiv news took centre stage."

The city government mentioned in a statement it has paid an undisclosed amount of interest to local creditors on Monday and would pay interest on a 300 million USD Eurobond ahead of schedule on July 6.

"Thus, Kyiv again proves its capability and readiness to repay debt in time and in full," the Kyiv government, which has three outstanding Eurobonds worth a total of 800 million USD, reported.