CBR comments might create some demand in the auction
Market action was weak, with the belly and long-term yields moving 2-3bp wider. Yesterday, the Ministry of Finance set the yield guidance at 6.45-6.50% for the 3-year RFLB 16 6.0 note, i.e. with a small premium of 2-3bp to the secondary market. Without a premium, the bond would look to be of low interest to market participants, in our view. The only demand factor in the auction is in the CBR’s comments about a ‘gradual’ policy easing. As such, the 3-year note could be regarded as a tool to express a view on rate cuts. Nevertheless, these comments do not add any new information about the magnitude of rate cuts and its reassessment has already been a factor justifying the downward pressure in the belly of the yield curve. Furthermore, we consider 4-year RFLB 17 7.4 (series 25080) as a better play on rate cuts than the 3-year note.
Maxim Korovin, Anton Nikitin
VTB Capital analyst
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