Non-Government Ruble Bond Market

Investment Summary

1. Telecoms
SouthTelecom-1 bond is underpriced compared to other issues of the company. With 0.3-year
difference in duration, it offers a premium of over 50 bpts UTK-3.
SibTelecom-2 is trading at 120 bpts premium over SibTelecom-1, which seems unjustified even taking
into account 0.8-year difference in duration.
2. Municipals
We still see some price growth potential for MosObl-5 issue – it is currently trading flat to MosObl-4
(9.05% p.a. versus 9.06% p.a.) despite half a year difference in durations (2.75 and 3.28 years
respectively).
3. Primary Placements
Lead managers expect Nizhny Novgorod Region to placed at 10.6%-11.1% p.a. Given both long
duration (about 2.5 years) and step-down coupon rate this forecast seems to be justified. The seasoned
issue of the region with duration of 1.4 years is currently trading at 9.7% p.a.
Investment Summary