Fixed Income Comment: (Gazprom news) is likely to provide a significant boost in liquidity to Russian securities

Despite low trading volumes being witnessed across Russia’s sovereign curve, the
latest news surrounding the ring-fence reform of Gazprom refocused investor
attention to Russian corporate eurobonds. The announcement refers to removing
the current restrictions on foreign ownership in Russia’s largest company and at
the same time revealed that Gazprom will also be permitted to acquire the state
owned oil company Rosneft. The decision itself is likely to provide a significant
boost in liquidity to Russian securities and in response to this landmark event, the
corporate eurobond market reacted positively with buying evident across most
sectors. Clearly, notable gains were registered across the longer duration and
more liquid Gazprom credits and on a price basis the Gazprom ’13 outperformed
the market, up 1.2%. The longer dated telecoms issues also benefited from this
renewed investor appetite and further strength was evident across the MTS ’10
issue, up 0.8%. Elsewhere, the new Bank of Moscow US$250 million 8.0% 5-year
issue was successfully placed at par and closed slightly higher in a 100-1001/4
range. With regards to the performance of the sovereign curve, the reaction to
yesterday’s events was somewhat muted and prices were again confined to a
narrow range with UST dictating the order of play. At the long end of the curve,
the benchmark RU30 opened at the day’s low of 963/16 and following a late
recovery in UST closed marginally higher in New York at the day’s high of 963/8,
with the spread over 10-year UST remaining relatively flat at around 313 bps.
Similarly, the ARIES group of credits were also rangebound with the ARIES ’14
spread over RU30 also relatively unchanged.