Daily Market Monitor: The ruble bond market reaped the rewards of increasing liquidity and a strengthening ruble on Monday

The ruble bond market reaped the rewards of increasing
liquidity and a strengthening ruble on Monday, although
benefits were not felt evenly, with only first-tier bonds
demonstrating uniform growth. In the positive territory
overall, second- and third-echelon prices were still mixed.
One explanation could be different investor bases: Some, who
prefer more reliable lower-yield bonds, “feel” the exchange
rate dynamics more than others, who invests in higher-yield
bonds. At the same time, bond yields are already at quite low
levels, which tends to make the market more cautious. We
believe, however, that the situation on the money market will
be favorable in the coming days and will support ruble bonds.
The Russian Eurobond market demonstrated a moderate
correction yesterday, with EMBI+ index reducing by 0.2% and
sovereign spread widening by 6 bps to reach 265 bps. With
strong benchmark dynamics, the current spread is quite
narrow and the correction could continue. Despite record oil
prices, the Russian economy demonstrated mixed economic
performance over recent months, which does not favor spread
contraction. On the other hand, the budget performance
remains strong and that should ensure solid support for
Russian sovereign bonds.