Russian Debt Market Daily: The Russian Eurobond market remains affected by the possible securitization of part of Russia’s debt to Germany within the Paris Club framework

EXTERNAL DEBT MARKET

The Russian Eurobond market remains affected by the possible
securitization of part of Russia’s debt to Germany within the Paris Club
framework. There is no longer serious selling across the board. In
corporates, liquidity is almost totally absent, while a widened Sovereign
spread to UST already supports Sovereigns quite considerably.
Most selling is concentrated in the Gazprom-13 and the Gazprom-34 (the
latter puttable in 2014), whose duration is close to that of the proposed
USD-denominated CLN issue by Germany. The yield of the new 10-year
CLNs (with coupon expected at 9.75-10%) provides significant premium not
only to MinFin bonds, but also to Gazprom bonds. The market is also
waiting for the Fed meeting expected to raise the refinancing rate by 25 bp,
as well as inflation data, which could determine the further direction of
interest rates.

LOCAL DEBT MARKET

Against the background of worsening ruble liquidity, the market saw
prevailing non-aggressive selling in the most liquid instruments. Moscow
municipals eased 0.1-0.2%, except the Moscow-38, which appreciated
0.3%. The leader in turnover remained the Moscow-32. The yield curve of
long issues is now at 8-8.7%.
The subfederals were mixed.
Most first-tier corporates declined 0.1-0.4%, with both VTB issues being the
leaders in turnover.
The OFZ sector saw the most turnover in long-maturity bonds, whose yields
declined to 7.5-8.13%.
Ahead of the end of the quarter and given uncertainty in the external debt
market, it is likely that most investors will remain on the sidelines.