News that Prime Minister Arseniy Yatsenyuk has resigned will likely create a bit of short-term optimism and positive market momentum this morning that the political impasse has been resolved – but likely only a point or so of upside for Eurobonds as there are simply still too many uncertainties still to factor in.

Herein we would highlight:

First the resignation of Yatsenyuk itself has to be approved, and there has to be a majority support for his departure. I guess that is the case, but it is not a given.

Note that Yatsenyuk timed his departure to ensure the maximum hit to President Petro Poroshenko – his resignation statement, as covered by the Financial Times was rather scathing of the support he had received from some of his so-called partners in the “reform” camp. Yatsenyuk will be pushing the line that ultimately he was let down by Poroshenko, at his time of need, using this to resurrect his own political future.

The assumption is that after accepting the resignation of Yatseniuk, the Rada proceeds to vote then on the nomination of Volodymyr Groysman to replace him as prime minister. Over the past few weeks his supporters have been working on securing support from independent deputies, and defectors from other parties to ensure majority support. The aim seems to be to make this a two party coalition, so hence not dependent on other more populist and difficult to manage parties which would then constrain the coalition’s room for manoeuvre – including Oleh Lyashko’s Popular Front. I think Groysman gets majority backing in the vote due tomorrow - but it is still not a given - there still might be oligarchic groups looking to sow division.

This all comes at a difficult time for Poroshenko, given the poor coverage he has received in the Panama Papers. He will hence be eager to quickly move on, get Groysman voted in, and to then try and delineate a new government programme to secure IMF approval. For Poroshenko now, the buck stops with him – he will no longer be able to deflect blame for policy failures on Yatseniuk. Groysman is clearly Poroshenko’s man. By this move Poroshenko will hope to turn his own political support (badly lagging now) around, by trying to manage government effectively, stabilising the macro and security situation, and getting Western financing back on track ASAP.

Groysman's problem might be ensuring a working and stable majority in the Rada, given that support from Yatseniuk’s Peoples Front might be soft, and even his own deputies in the Poroshenko Bloc are a very mixed bunch and “flakey” when it comes to voting. As a result, he may well need to rely on situational majorities in the Rada formed for each key reform vote. While Groysman's time as speaker of parliament will be useful there, the choice of the new speaker will be critical still.

Second, the market will want to see both the reform team and also details of the new government’s reform strategy. Key will be getting the International Monetary Fund program back on track, which means backtracking on some of the populist impulses which have been seen in recent weeks, including over gas price hikes.

The macro reform stuff is perhaps much easier to roll out – these are objectively defined/measured reforms, and there is not much scope for the new Groysman administration to re-design the wheel. The difficult things are subjective and related to “rule of law,” and the anti-graft agenda, which frankly the Poroshenko presidency has achieved very little so far but which challenge Ukraine's corrupt business and political elites and vested interests therein.

Western creditors, civil society and the EuroMaidan will want to see real progress now starting out at the Prosecutor General's Office.

Poroshenko will likely ask for more time – I think Western creditors will likely give him the benefit of the doubt, happy just that Ukraine again has a functioning government which can ensure that the key Minsk II deal is kept in place and a type of peace in the east maintained.

But it is more difficult to call the reaction of civil society and the EuroMaidan street.

Even Western creditors are likely to have a relatively short fuse on this one, i.e. I can imagine the next IMF tranche being signed off relatively easily, perhaps over the next 1-2 months (likely releasing $3 billon or so in total Western credits).

But then the key questions remain is the Poroshenko administration that committed to the rule of law agenda, and even the IMF programme?

On the IMF programme remember back late last year, around discussion of the budget and revisions to the tax code, there were those in the Poroshenko Bloc calling for Ukraine to let loose from the IMF.

If the macro situation is stable – foreign exchange & balance of payments and budget holding in, with the economy pulling out of recession, I think hold habits will tend to return.

Then if it is a choice between making difficult decisions over rule of law (actually indicting people) and keeping the IMF programme on track, I think the temptation will be to accept going off track with the IMF, buying time/muddling through.

The latter could resemble the Yanukovych administration in 2011-2013 after it went off track on its IMF programme after victory in the 2010 presidential elections.

Key then and now might be the willingness of the market to finance a Ukraine, off-line with the IMF.

In the end, the key question that needs to be asked is are Poroshenko/Groysman willing to keep to the IMF programme at all cost (rule of law) – therein I really am not sure.

The proof of the pudding will be in the eating, with the key test of Poroshenko now looming. Is Poroshenko a real and meaningful reformer, or not.

No more room for excuses – and can he change a system where graft is ingrained?

Third, and as noted above, important for the market will be the choice of reform ministers in the new cabinet. The assumption is that with Groysman taking the post of prime minister, incumbent finance minister, Natalie Jaresko will be moved aside, likely in favour of the former Slovakian finance minister, Ivan Miklos.

Jaresko is obviously well respected by the investor community, and has extremely strong connections into the US administration. The latter will likely be missing for Miklos, albeit he is likely to have strong connections into the EU. That said, with the EU in some disarray at present (i.e. Over the migrant issue, after the Dutch referendum and the likely challenge looming from the Brexit vote), I think this could prove much less effective in channelling international support than has proven the case for Jaresko, and also Yatsen5uk.

I just wonder if Jaresko might be offered a different role in the new administration – there was talk of a deputy prime minister role, perhaps as an anchor person for international economic relations. Whether she would be open to such a move, after an intensive and likely exhausting period as minister of finance, is open to question.

For me key to watch is the National Bank of Ukraine. The NBU has made remarkable progress on the reform front over the past two years under the oft criticised Valerie Gontareva. Gontareva no doubt has her faults, but she has proven to be an able manager and dynamo for radical and positive change/reform at the NBU – extending to internal administration reform of the NBU, bank reform, and monetary policy reform. Her departure at this stage could be a huge blow for reform, and also for those calling for the NBU to be truly independent. I think it will be a key test of Groysman whether he leaves Gontareva and the NBU alone – or some deal been done with Yatsenyuk, over the NBU to ensure his departure as prime minister?