Daily Market Monitor: Russia’s Eurobond market was also showing confidence on Thursday as news agencies reported that Germany had agreed to the early redemption of Russia’s Paris Club debt on par

The rouble bond market remained upbeat on Thursday, although
it looks unlikely that the mood will survive. Uncertainty on the
exchange rate side and relatively low yields leaves little room for
upward movement. We expect consolidation in the coming days, most
likely on Friday.
In the meantime, the Central Bank placed its new OBR-3 bonds. Rub
100 bln were presented for auction, of which Rub 73.5 bln were
placed at an average yield of 1.62%, with a put option in a week’s
time (April 14). The placement looks like a technical move – the bonds
will be registered and bought back to become ready for secondary
placement (allowing the Central Bank to obtain another short-term
instrument). OBR-3 will mature in Sept ’09 and the placement will have
a number of put options, the first is scheduled for Dec ’05, making the
bonds effectively an 8-months instrument.
Russia’s Eurobond market was also showing confidence on
Thursday as news agencies reported that Germany had agreed to the
early redemption of Russia’s Paris Club debt on par, which increase
the likelihood of a deal with all of the club’s members. At the same
time, U.S. treasuries fell after a comment by Anthony Santomero,
president of the Federal Reserve Bank of Philadelphia, on U.S.
economic statistics in the evening. We believe this could have an
adverse impact on the Russian papers on Friday. The potential for a
contraction of Russian spreads following a Paris Club deal still exists in
the mid-term, but we do not see significant upside beyond this.