Local sovereign debt: against the 10% barrier
Yesterday, OFZs opened stronger, with yields down 3-5bp. However, the gains were later pared amid continued pressure on the FX spot market. We highlight that the OFZ curve now prices in no change to CBR monetary policy on Friday, unlike the NDF curve, for instance. Therefore, any concerns in this regard produce a negative effect on the local debt curve. In the end, OFZs closed marginally lower, with longer-dated tenors down 15-25bp price wise or 23bp higher in yield terms. Overall, RFLB 28 closed at a yield of 9.95%, the belly of the curve trades at a 9.95-9.98% yield. Therefore, once again, the market is standing on the brink of the 10% threshold, which has proved to be a strong resistance level in the past. However, we highlight that the spike in FX volatility is likely to undermine the bidding desire of local banks, the main support factor so far. Subsequently, we do not rule out that OFZs might cross 10% now. Meanwhile, in light of this we expect MinFin to cancel the auction this week.
Maxim Korovin, Tatyana Zueva
VTB Capital analyst
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