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UFS Daily Review: Eurobonds: Moderate growth continued

October 2, 2012
Russian Eurobonds
Secondary market

On Monday Russian Eurobonds continued moderate growth following most stock markets on favourable statistics – US and European Manufacturing PMI in September. Both indexes – PMI in Europe and ISM in the USA demonstrated slight growth.

Russia-30 extended its gains rising 0.2% to 126.5% of the nominal. The spread to 10-year US treasuries also continued to shrink – by the end of trading it narrowed to 147 b. p. A several-month low of the spread was observed in mid-September, when it reached 122 b. p. Other sovereign issues also closed in the green zone. Here the leading gainer was Russia-42 that rose 0.5%. In the corporate sector growth in most issues did not exceed 0.2% with only several most volatile issues growing by more than 0.3%. Among them Vimpelcom-21 and Vimpelcom-18 should be noted that increased about 0.4%. Long-term bonds of VEB were going up as well: VEB-20 added 0.5%, VEB-25 climbed 0.3%. Most long-dated issues of TNK-BP added 0.2%. A similar average growth was shown by LUKOIL. In the metallurgical sector increasing demand was recorded for Severstal (for instance, Severstal-17 gained 0.4%). Metalloinvest-16 rose about 0.2%.

On Tuesday morning market faced moderately negative external background due to the news that Spain is ready to request a large-scale bail-out next weekend. Investors fear a short-term market downfall afterwards and Spain’s downgrade to junk status. European indexes opened down; Brent lost
about 0.25% and traded at 112.0$ per barrel. Yet Russia-30 has been increasing 0.1% so far and traded at 116.2% of the nominal. In such uncertain
environment we forecast slack dynamics to prevail in the following days.

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