Local sovereign debt: yields on the rise
On Friday, OFZs traded 0.4–0.5pp lower on the longer end in price and lost around ¼ on the belly. Overall, the curve moved up 7-9bp in almost a parallel shift. Hence, RFLB 28 closed at a yield of 10.27%, while bonds on the belly traded a tad above 10.50%. Meanwhile, the front end continued trading at the 9.80–9.90% level. Overall, we continue to think that the only thing preventing the OFZ market from selling off is the absence of new supply. However, this could change next year, given that crude prices are now lower than the levels drafted in the budget. Therefore, we believe OFZs do not yield much value at current trading levels, since the spread to the CBR’s key rate is quite narrow by historical means.
Maxim Korovin, Tatyana Zueva
VTB Capital analyst
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