Local sovereign debt: 10% proves a strong resistance
On Friday, the OFZ market closed solidly in the black. Longer-dated issues closed about 60-70bp higher in price terms – RFLB 28 closed at a yield of 9.80%. On the belly of the curve, the bonds were marked up near 40-50bp. Overall, the curve tightened near 10-12bp on Friday. Compared to EM peers, the Russian debt market posted decent gains in line with Polish and Indonesian benchmarks. Hence, once again the 10% level proved to be a strong resistance for the market, where, among other factors, local bid has increased markedly. Meanwhile, MinFin could potentially tap the market this week, but the Ministry recently placed bonds at a yield of about 10-15bp lower. Hence, we think the probability of seeing an OFZ auction on Wednesday is around 10-20%.
Maxim Korovin, Tatyana Zueva
VTB Capital analyst
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