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Local sovereign debt: expectedly strong auction

Yesterday, the Ministry of Finance sold RUB 10bn of RFLB 28 at an average yield of 8.84%, amid demand of RUB 25.3bn. Thus, another strong auction in a row as market participants continue covering shorts, we think. The response to the decent auction was quite positive as prices moved up 15-25bp after it. Overall, long OFZs gained 50-60bp, price-wise, yesterday, while bonds on the belly advanced 40-50bp. The front end proved to be more resilient, so the curve has flattened more with the 2s10s spread now standing at just 40bp, i.e. at lows since the end of 2012. In general, yields on the belly and long end moved down by 10-15bp yesterday (the mid part outperformed a little bit here), while front-end rates declined only 5bp.
Maxim Korovin, Anton Nikitin
VTB Capital analyst


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