Fixed Income Comment: Amid modest trading volumes Russian eurobonds continued to trade within a narrow range yesterday

Amid modest trading volumes Russian eurobonds continued to trade within a
narrow range yesterday as the market cautiously awaits today’s all important US
non-farm payroll data release. Although the ongoing developments in the hostage
crisis have dampened sentiment the major influence remains movements in UST
and consequently the Russia sovereign curve tracked UST lower throughout the
day. The benchmark RU30 opened at the day’s high of 955/8 and traded to a low
of 955/16 before closing in New York at around 953/8, resulting in a narrowing of the
RU30 spread over 10-year UST from 321 bps to 317 bps. Selling pressures were
also evident across the ARIES cluster of credits with the ARIES ’09 issue
underperforming the market. With ARIES ’14 trading lower in a 1115/8 -3/4 range
the spread over RU30 widened by around 3 bps to reach 62 bps, its highest level
in almost a week. In contrast to the performance of the sovereign curve, the
positive mood towards Russian corporate and banking eurobonds was sustained
yesterday with notable gains being registered across most sectors. While the
TNK ’07 issue clearly outperformed the market, up 1.45% over the previous day,
demand was also evident across the VTB credits and once again the Evraz ’09
increased markedly. Given the strong correlation between the performance of the
more liquid Gazprom credits and movements in the sovereign curve, the prices of
these respective issues eased slightly.