Daily Market Monitor: We believe the potential for price growth for Russian Eurobonds is limited at current levels, as support from benchmarks is not sustainable

The nervousness on the ruble bond market calmed down
yesterday as Moscow City clarified its borrowing plans. Two
new issues are planned for Oct. 6: #37 - Rub 3.9bln for three
years, and #39 – Rub 5bln for 10 years. The latest Moscow
City bond issue (on Sept. 2 with a total volume of Rub 7.9bln)
saw substantial demand, so we believe that the new
placements also face healthy demand despite the long Rub
5bln issue – again, more certainty on the exchange rate side
should be a supporting factor.
The Central Bank also plans to place its bonds (OBRs) on Oct.
6. The amount up for auction will be Rub 34bln, put option is
set for July 15. The Central Bank intends to place the issue
“to the market” and targets the yield at 6%.

Russian Eurobond trading was relatively inactive yesterday.
Sovereign spread widened by 3bps to 306bps, mostly due to
benchmark yield contraction. We believe the potential for
price growth for Russian Eurobonds is limited at current
levels, as support from benchmarks is not sustainable.
Extremely high and still-growing oil prices and fears about US
economic growth delay have pushed UST yields down.
However, positive economic figures from the US in the coming
days could outweigh both factors and provoke bond prices to
decline.