Trends unchanged (Russia Fixed Income Weekly)

The US Treasury market corrected last week, following the publication of the minutes from the latest FOMC meeting, which revealed that policy makers remain concerned about inflation. Russia’s long-term bonds followed the underlying USTs, while shorter ones demonstrated more resilience. As a result, the yield curve continued to steepen. Since 15 February, the benchmark Russia 2030 issue has lost 0.24%, with its spread declining by 7bp to 213.
Corporate Eurobonds performed in the same yield-curve-steepening trend last week. Most long-term issues, especially those with narrow spreads, posted losses, while shorter ones ended the week higher. Gazprom’s bonds were the hardest hit (the DB Russia CEB Gas Index has lost 0.95% since last Friday). The bonds issued by private banks, which are mostly short-term and high-yielding, were once again the winners of the week. The DB Russia CEB Private Banks Index added 0.38%. Overall the Russian corporate Eurobond market lost 0.23%, while the average spread narrowed by 7bp.
For most of last week, the local market continued to decline: the RGBI Index lost 0.49%, while the RCBI ended the week 0.22% lower. Among the corporate blue chips the largest losses were seen in AIZhK 6 (-2.17%), Russky Standart 8 ( 1.83%) and Gazprom 9 (-1.39%).
The primary market saw another busy week with three large placements by Russian banks. Rosselkhozbank sold RUR5bn worth of ten-year bonds, while NOMOS-Bank and Bank Soyus each placed RUR3bn worth of three-year bonds. However, Bank Vozrozhdenie chose to postpone its planned RUR5bn placement. The placement of new four-year bonds by Moscow City Government was relatively unsuccessful because the issuer was reluctant to offer a significant premium to the secondary market and only RUR1.1bn out of the planned RUR5bn worth of bonds was placed. Finally, the Finance Ministry continued its active borrowing, having sold RUR30bn worth of GSOs and RUR5.9bn worth of OFZs.

Author: Mikhail Volkhonsky ([email protected])