Daily Review of the Debt Market. Spain Might Turn to the EU. IMF: Spanish Banks May Need up to 80 billion euros. We Recommend Staying out of the Market

Spain Might Turn to the EU. IMF: Spanish Banks May Need up to 80 billion euros. We Recommend Staying out of the Market

Russian Eurobonds closed down yesterday. The reason was Bernanke’s speech, which didn’t imply any possibility of new monetary stimulation by the FRS. Fitch added negative with its decision to downgrade Spain by three notches at once. However, by the end of trading the markets could partially win back the losses. As a result, Russian sovereign Eurobonds lost an average of about 0.1%. Most corporate issues declined by 0.1-0.2%.
Yesterday ruble bond quotes closed slightly down with an average decline of 0.4-0.5%. Trading activity decreased to average.
The IMF estimated bail-out needs of Spanish banks as 40 billion euros, as mentioned in the IMF report published yesterday after evaluation of the financial sector. However, this sum doesn’t include additional capital recommended as a buffer to cover restructuring expenses and loan losses. The buffer is assessed as additional 20-40 billion euros. Hence, the total volume of funds, necessary for Spanish banking system to survive crisis, totals 60-80 billion euros. Earlier Fitch assessed the capital needs as 60-100 billion euros.
Yesterday there was a leak of information to newspapers from Brussels and Berlin officials that Spain will ask for help already this weekend. However, the Spanish government official noted that it will be possible only after banking system audit.


Trading Ideas in the Bond Market

Eurobonds:

Strategy Buy & hold:

Lukoil-14
Bank of Moscow-15
TCS Bank-14
Promsvyazbank-14, 15
HCFB-14
Renaissance Capital-13
Kazkommertbank-13, 14

Ruble Bonds:

Strategy Buy & hold:

Gazprom-13
VTB ВО-5, ВО-7
RSHB-10, ВО-5
LUKOIL BO-1, BO-2
Gazprom Neft-3, BO-5 and BO-6
Bashneft-3
Tatfondbank BO-1, BO-4 and BO-5