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Russian/CIS bonds: poisoned by weak oil

On Friday, Russian/CIS bonds corrected down following the drop in crude and weakening FX. In high grade, long oil and gas names were under pressure: Rosneft’s issues fell near 1.0pp in price, SIBNEF 23 (YTM 7.30%) sagged 0.7pp in price, and the belly and the long end of the LUKOIL curve slipped 0.5-0.9pp in price, having widened in yield 13bp. Mid-term GAZPRU tenors were a bit more resilient than peers, declining just 0.3-0.5pp in price, though the long end underperformed, as GAZ 37 (YTM 7.30%) and GAZ 34 (YTM 7.49%) lost 1.5pp and 0.9pp in price, respectively. Among financials, VTB and GPBRU notes remained weak spots: specifically, perpetuals VTB (CurY 11.66%) and GPBRU (CurY 9.19%) dropped 1.2pp and 2.3pp in price, respectively; VTB 20 (YTM 7.72%) and subordinated GPBRU 23 (YTM 10.55%) edged down 0.8pp in price. The Russian sovereign curve also suffered, moving up 10-12bp in a parallel shift. In sub-investment grade, subordinated banking notes lagged behind: NMOSRM 19N (YTM 12.31%) lost 2.0pp in price, PROMBK 19 (YTM 13.43%) declined 1.4pp in price, and AKBHC 18 (YTM 17.30%) closed at 91.57 (-1.0pp). Besides, METINR 20 (YTM 9.03%) fell 1.7pp in price, followed by CHMFRU 18 (YTM 6.62%) and TRUBRU 18 (YTM 9.69%), which dipped in price 0.9pp; the VIP curve was down 0.5-0.8pp in price. At the same time, RASPAD 17 (YTM 14.25%) bounced up 1.0pp in price, and subordinated RCCF 18 (YTM 27.76%) recovered in price 3.0pp. In the CIS space, Ukrainian sovereign issues fell 0.6-1.1pp in price. Kazakh names were trading on a softer footing as well: ZHAIK 19 (YTM 7.71%) slid 0.8pp in price, long KZOKZ notes and KAZAKS 44 (YTM 5.22%) ended the day 0.5- 0.6pp lower in price.
Maxim Korovin, Tatiana Zueva
VTB Capital analyst

liquidity, oil

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