18 July 2018
Statement made by the head of Fed to the US Senate was the principal event yesterday. The markets responded to the speech of Jerome Powell positively taking it as an indication of the authority having no intentions to carry out tough monetary credit policy. The Russian Eurobonds were no exception and traded 5-7 bps wider in terms of yield.
Market situation. Statement made by the head of Fed to the US Senate was the principal event yesterday. The markets responded to the speech of Jerome Powell positively taking it as an indication of the authority having no intentions to carry out tough monetary credit policy. The Federal Reserve plans proceeding with the gradual normalization of the interest rates, which will be supporting the inflation staying close to targets and the labor market. At the given background, the American exchange indices and dollar continued adding in price. The yield of 10Y Treasuries varied within the range of 2.84-2.87% annually and closed approximately unchanged. The EM sovereign notes segment stayed negative. The Russian Eurobonds were no exception and traded 5-7 bps wider in terms of yield. The long-term issues were slipping within 1 pps of the face value. The results of the Russian state segment was affected by the plunging oil quotes and lack of any remarkable progress after Putin-Trump meeting. Sellers prevailed in the corporate notes as well. The long-term notes of Gazprom were underperforming.
Local bonds lacked grounds for further growth yesterday showing one of the worst results amid the local debt grounds of the emerging markets. The investors demand suffered from the negative conjunctures of the currency and oil markets. Total of RUB 40 bn worth of notes will be offered at the Finance Ministrys auctions on today.
Market situation. Local bonds lacked grounds for further growth yesterday. The investors’ demand suffered from the negative conjunctures of the currency and oil markets. The optimism related to the successful finalization of the Russia-US presidents meeting was no longer in focus as the story failed to develop. Thus, from the very morning the OFZ were in the reign of sellers. For the day, the selloff focused on the mid-term and long-term notes. OFZ quotes lost 0.5 pps average of the face values. The short-term series were more confident losing up to 0.2 pps. The 26212 and 26224 series were underperforming the most losing 0.7 pps of their face values. Participants’ activity increased a bit on Tuesday, yet still lagging the average volumes. Total trade volume was almost RUB 19 bn, 90% of which involved the classic OFZ. As for the flexible coupon OFZ, the 52002 series inflation linker was of the most interest among the players on Tuesday. The note lost in price lightly in course of trade; yield of the series added 2 bps to YTM 2.94%.
Forecast. Sum RUB 40 bn worth of notes will be offered at the Finance Ministry’s auctions on Wednesday, same as a week ago. In terms of structure, the offer will be the following: RUB 20 bn offer will be formed by the 25083 series issue (due in December of 2021) and RUB 20 bn more – by the long-term 26224 series (due in May of 2029). Similar offer structure was previously offered on July 4. The authority managed to sell the entire offered volume then. As the trade opened, the combination of drivers seems to be unfavorable for the ruble notes, which are on sale.
Author: Julianna Lukyanova
Banks are taking assets from the deposits in the CBR.
Dollar rebounded to growth at the currency market this morning and tried to pass the RUB 62.5 level in course of the first hour of trade (comparing to Friday close near RUB 62.33). By noon, the situation stabilized for ruble, yet in the afternoon the US currency was climbing above RUB 62.55, however failing to fixate up there. By evening USDRUB corrected below RUB 62.5, however, dollar managed to maintain position and even climbed up to RUB 62.6 by the end of trade.
CBR has built up the limit at the usual weekly deposit auction, however, the banks placed nearly RUB 500 bn lesser assets (RUB 2.38 trillion) than a week before. The tax period start overnight was likely responsible for the credit organizations having made a decision to cut down their ruble positions in the CBR: banks took out the liquidity in order to fill the reserves after the insurance payments and in order to prepare for the principal payments to budget in a week.
Author: Julianna Lukyanova