Daily Market Monitor: we see the Russian Eurobond market as relatively high at present and we believe it could decline in coming days, following oil prices, which have already fallen
from local

The ruble bond market is suffering from a lack of ideas: Low
yields are leaving little room for price increases. At the same
time, the market has become very sensitive to negative news.
The response to news flow, especially on the exchange rate
side, has become “asymmetric” — insignificant dollar gains
have been provoking price declines while any weakening of
the dollar is leaving the market practically unchanged. The
environment remains positive for the market, however, and a
major downward correction remains unlikely.

The Russian Eurobond market offered few surprises
Tuesday. Benchmarks were stable with the UST’10 yield
unchanged at 4.22%. Russian sovereign spread contracted 2
bps to 236 bps, while the Russia’30 yield declined to 6.77%.
The most significant news Wednesday will be the meeting of
the U.S. Federal Reserve on a key rate increase. The market
broadly expects the Fed to increase the rate another 25 bps to
reach 2%. What would be more significant would be any
comment given with the decision — or any other sign of what
economic tack the Bush administration will take following its
re-election. Either way, we see the Russian Eurobond market
as relatively high at present and we believe it could decline in
coming days, following oil prices, which have already fallen
from local highs.