Daily Market Monitor: Gazprom merger terms scrapped – negative for equity, positive for debt

The rouble bond market reflected positive sentiment by attracting
liquidity from the local money market on Thursday. At the same time,
we see forthcoming dollar appreciation coupled with the recent
contraction of liquidity as likely to slow market activity. Thursday’s
main event on the local market was the placement by auction of OBR-2
Rub 10 bln. An issue of about Rub 4 bln was placed at an average
yield of 4.08%, with a put option for Sept 15 2005.
The Russian Eurobond market showed positive dynamics on the day,
proving the leader on the global emerging debt market on the back of
weak performance by U.S. Treasuries, caused by acceleration in
American inflation. The sovereign spread contracted by 17 bps to hit
185 bps. The indicative Russia’30 bond experienced slight growth,
while its yield, moving in the opposite direction to the benchmark’s (up
9bps to 4.3%), tightened by 8 bps to 6.21%.
Some uncertainty may arise on the Russian Eurobond market in
coming days due to opposing factors shaping benchmark movements.
In contrast to favourable data releases in the United States (Initial
Jobless Claims and Philadelphia Fed. Index on Business Conditions),
Thursday’s statement from U.S. Federal Reserve Chairman Alan
Greenspan on the budget deficit raised concerns about the viability of
high long-term economic growth. Greenspan was also less than
optimistic in evaluating current growth prospects as compared with the
latest FOMC announcements. The situation is likely to clear up with the
releases of data on GDP and personal consumption growth in
1Q2005, scheduled for April 28.