On Monday, local sovereign bond yields declined 3-4bp on the back of good global demand for risky assets as well as RUB appreciation. Thus, the market once again highlighted the rather high correlation between RUB and sovereign bond yields (the correlation coefficient is 0.85-0.9 for long-term yields). RFLB 20 closed at 7.49% and RFLB 28 at 8.0%. We consider that sovereign bonds could be well bid over the next month, as no primary supply risks are seen and carry-collection is likely to be the main trade over the next month.
Yesterday, Minister of Finance Anton Siluanov commented that the ministry did not expect to save some funds in the Reserve Fund this year. However, we consider that some excess might appear by the end of 2013 due to better than expected domestic borrowings if expenditures are not distributed in full (as is usually the case). Moreover, the government has approved the allocation of up to 10% of the National Wealth Fund into more risky assets, opening the formal way to investments into Ukrainian Eurobonds.