Following Russia’s military invasion of Ukraine last week, international markets have witnessed a rapid spike in volatility, with CDS spreads of both countries rising dramatically as investors globally recalibrate risk outlooks for both nations.

In an attempt to meet the surging expenses of the war, Ukraine has turned to issuing ‘war bonds’ and has raised a whooping $277 million through issue of such bonds. The nominal value for each Ukraine war bond is 1,000 Hryvnia, equivalent to about $33.

A war bond is essentially a debt instrument issued by the Ukrainian government, to help finance its military operations against Russia. These bonds make emotional appeals to patriotic citizens to lend money to the government. Previously, the U.S. had issued such bonds (termed as Liberty Bonds) during the world wars.

Such a move hasn’t been used by other governments in modern times. Ukraine has promised to pay 11% to investors who will support the nation in their fight, by purchasing these bonds. These bonds have no coupon payment and will mature within a year. Needless to say, a significant amount of risk is associated with these securities, considering the ambiguities of the situation. Investors of these bonds may lose out in case Ukraine is defeated by Russia, Ukraine defaults on these bonds or that the country’s currency value falls drastically after the war has concluded. However, for many investors, the priority is to show their support and stand in solidarity with Ukraine in these difficult times and profiting from their investment is secondary.

Acknowledging the fact that Ukraine’s financial assets are partly frozen at the moment, the government’s initiative has been effective in raising funds for the war-ravaged country. The government also issued two-month bills with a 10% yield.

While institutional investors including major U.S. and foreign banks – notably Citigroup – have taken their stakes in this, it isn’t easy for retail investors to purchase these bonds directly.

Meanwhile, Ukraine is also considering offering its bonds in dollars and euros, to appeal to its ethnicities settled in different nations.