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Local sovereign debt: weaker and steeper

Yesterday, investors were selling OFZs with international and local accounts being active on the offering side. Thus, we noted RFLB 28 (YTM 7.99%) lost 35bp, while RFLB 27 (YTM 7.89%) slipped 50bp, price-wise. On the belly of the curve, bonds moved down 20-40bp in price terms. Specifically, RFLB 19 6.70 (YTM 7.25%) lost 35bp in price. That issue offers the best roll-down opportunities at the moment. Continued pressure on the longer end of the curve has fuelled some more steepening, with the 2s10s spread widening 3bp to 113bp. Yesterday, the Ministry of Finance announced RUB 20bn of RFLB 23 and RUB 15bn of RFLB 19 6.70 would be offered at tomorrow’s auctions. So, to some extent, the steepening was also supported by the new supply.
Maxim Korovin, Anton Nikitin
VTB Capital analyst


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