Local sovereign bonds: yield curve looks too flat
On Monday, RUB sovereign yields moved down 4bp in the belly and 7-8bp in the long end. RFLB Dec-19 closed below 8% and RFLB 28 was quoted at 8.42%. Meanwhile, the yield curve continues to flatten behind the belly and the spread between 7s14s bonds is only 30-35bp, a record low. At the same time, the spreads to XCCY reached 100bp and are at local highs. Considering that the price action in the local sovereign universe has been rather good in the last few sessions, the chance for success in the bond auctions on Wednesday is quite high and the Ministry of Finance is unlikely to miss the window this week. We think 7- and 15-year notes might well be offered, thus setting a limit on the rally in the near future unless RUB is in good demand.
Maxim Korovin, Anton Nikitin
VTB Capital analyst
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