Fixed Income Daily: The market is very quiet to start this Easter shortened week. Unfortunately we expect this quiet period to contiue for this and next week.

EXTERNAL DEBT MARKET
Russian Eurobonds remained unchanged on Friday against the
background of some yield increases in US Treasuries. Investors are
unwilling to increase their market activity ahead of the US Fed’s decision
on its interest rates to be made tomorrow. No one doubts that the Fed will
raise its key interest rate by another 25 bp to 2.75%, but, as always, the
main issue is what the FOMC is going to say in its comment concerning the
economy and future interest rate policy. Most likely, the Fed will again
mention steady economic growth in the US and announce further
measured interest rate increases for the sake of inflation control.
The Russia-30 has depreciated to 102.500 and is traded at a spread of 205
bp, following the yield increase of the 10Y UST from 4.48% to 4.52% today.
It is worth noting that Russian corporate and bank Eurobonds saw healthy
demand on Friday, having added ј-3/4%.
The markets are likely to remain inactive until the Fed decision is published
tomorrow.
We consider this sell-off to be a good opportunity to buy cheaper Russian
Eurobonds. We believe that the spread of the Russia-30 should return
below 200 bp quite soon, and should narrow to 150 bp in the future.
Excellent fundamental and debt parameters of the country should outweigh
all risks, and investors should renew their active purchases of Russian
Eurobonds soon.
We do not change our target price of the Russia-30 as of the year end,
which is about 105.125, and its spread about 150 bp. Therefore, we
recommend buying the Russia-30 at the current levels.
LOCAL DEBT MARKET
Trading was rather dull on Friday, with most first-tier issues mixed within +/-
0.1-0.2% on average turnover.
The long OFZ yield curve remained practically unchanged for the day at
7.53-8.73%. Selective deals were observed in the Moscow municipal
sector, with the leader in turnover being the Moscow-28, most probably,
continued to be bought back from the market by the Moscow municipality.
Non-aggressive selling prevailed at the long end of the corporate first-tier
yield curve, while equally non-aggressive buying dominated at the short
and medium parts of the curve. The second and third tiers were mixed, with
approximately equal number of buyers and sellers. Today and tomorrow,
the participants of the forex and Eurobond markets will be waiting for
tomorrow’s FOMC decision, which should exert certain negative pressure
upon the local market, too. This morning, the euro has eased to 1.32
EUR/USD, making the ruble depreciate to 27.52 RUB/USD. Against this
background, the yield of the 10Y UST has reached 4.52%, and the Russia-
30 has fallen below 103% again, with its spread widened to 207 bp. An
additional negative factor for the ruble debt market will be more supply of
second- and third-tier papers, which may cause some yield increases in the
secondary market.