Fixed Income Daily: Large-scale re-openings continued in the government bond sector on Wednesday

Who would have bet 3 months ago that the UST 10 year would have a 3 handle rather than a 5! Great support for EM.

Evraz is now marketing a re-tap of the \'09. No true price guidance just yet - only rumours expect to have something more concrete soon.

Kopeyka closing this afternoon after US accounts come in.

EXTERNAL DEBT MARKET

US Treasuries continued their rally yesterday against the background of the
US Fed statement that the US economy was growing, but inflation
remained under control, thus allowing the Fed to continue with its policy of
moderate rate hikes. As a result, the yield of the 10Y UST broke downward
the 4.00% level for the first time since April 2004 and stalled at 3.97-3.98%.
This prompted further growth of emerging bond markets, which have been
already seeing positive news recently, including Brazil and Venezuela
rating upgrades. As a result, Russian Sovereign Eurobonds added another
Ѕ% yesterday. The Russia-30 rose to 97.500 by the evening in Moscow
yesterday and to 97.750 this morning, having thus reached a new
maximum since late March 2004. Still, the spread of the Russia-30 to the
10-year US Treasury Notes remained stable at 310 bp.
In corporate Eurobonds, only the Gazprom moved, adding another Ѕ - 7/8
at the long end and continuing its week-long rally. The yield spread of
Gazprom Eurobonds to Russian Sovereign Eurobonds fell 50-60 bp over a
week on the news of Gazprom and Rosneft merger, Gazprom share market
liberalization, and good 1Q04 Gazprom financials. The rest of Russian
corporate Eurobonds remained almost unchanged..

LOCAL DEBT MARKET

Large-scale re-openings continued in the government bond sector on
Wednesday. The long OFZ yield curve remained at 7.65-7.97%. In the
Moscow municipal sector, medium- and long-dated issues saw robust
demand, but prices increased insignificantly. In the sub-Sovereign sector,
long-dated Moscow Region issues performed traditionally well in the
growing market. The first-tier corporates were mixed, while investors’
activity in the sector remained quite low. The most actively traded were
bank and telecom bonds, boosted by a local rally in the Russian Standard
and Sibirtelecom papers that have recently entered the secondary market.
The state of the money and foreign currency markets does not hinder, and
the external and raw material markets favor upside in the ruble debt
market. A shift in investors’ priorities towards the second tier and gradual
spread narrowing between the tiers may be expected to continue.