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Local sovereign bonds: OFZs follow RUB dynamics

On Friday, the local sovereign yield curve tightened 5-8bp in the long-end as RUB was no longer under pressure. RFLB Dec-19 closed at 8.0% and RFLB 28 closed at around 8.50%. Overall, the long-end of the sovereign curve looks too flat: in particular, the spread between 7y-14y notes is around 40bp, a record low level since the issuance of RFLB 28. In our view, this is justified by a lower participation ratio of non-resident investors in the long-end after the recent sell-off as well as expectations of a rather decent primary market supply in the belly of the curve, as current conditions do not allow the Ministry of Finance to tap long-term bonds. Nevertheless, in our view, the 5-7-year segment looks better than the long-end at the moment.
Maxim Korovin, Anton Nikitin
VTB Capital analyst

OFZ, bonds

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