Fixed Income Daily: Practically all liquid government, municipal and corporate rubledenominated bonds fell noticeably again yesterday

EXTERNAL DEBT MARKET
The UST market continued falling yesterday. The US economic data was
mixed, but the market interpreted the figures as bearish, the same as
throughout the last few days. The May CPI was -0.1% (0% expected), while
all the economic activity figures were above expectations. The Empire
Manufacturing Index was 11.7 (1.0 expected), industrial production in May
was up 0.4% (+0.2% expected), and capacity utilization also exceeded
expectations at 79.4% vs. 79.3% expected.
As a result, the 10Y UST yield rose to 4.14% annualized, and Russian
Eurobonds lost some Ѕ-1%. The Russia-30 fell to 109.500 (the spread
widened to 172 bp).
Today, the price levels and yields in the UST market have remained at the
levels of yesterday’s close. The market is waiting for initial jobless claims
today.
LOCAL DEBT MARKET
Practically all liquid government, municipal and corporate rubledenominated
bonds fell noticeably again yesterday. A new ruble slump and
high overnight rates stimulated further profit taking begun on Tuesday
afternoon. The market extended its losses by another 0.3-0.5% yesterday,
and thus many 3-4-year papers lost some 1% during the last two days.
The Gazprom-4 fell to 101.20 yesterday (was at 101.95 last Friday), while
the Moscow-39 fell to 103.50-103.70 (was 104.70 on Friday). The second
tier saw selling, too. However, overall activity remained low, albeit higher
than the day before.
Today, the market has begun rising fast from the open and has already
regained Friday’s highs in the majority of issues. The Gazprom-4 is again
at 102.00, and the Moscow-39 has risen to 104.15. Meanwhile, the ruble
has remained at 28.60 RUB/USD, and overnight rates have remained high
at 5-6% annualized. Yesterday’s selling seems to have been selective
rather than mass-scale – in the sense that selling was coming from several
players only. As soon as supply of papers on their part has dwindled, the
market has instantly returned to its previous price levels.