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Local sovereign debt: weaker in an illiquid market


Yesterday, OFZs traded softer. Longer dated RFLB 28 (YTM 12.84%) lost 0.8-1.0pp in price, while bonds on the belly declined 0.3-0.4pp. Hence, yields moved up 18-20bp along the whole curve. In our view, the belly of the curve (i.e. 5-7 year tenors) now looks most interesting. The spread between 5- and 10-year OFZs stands near -50bp, which looks excessive compared with the front end of the curve and other EM local sovereign debt markets.

Maxim Korovin, Tatiana Zueva
VTB Capital analysts


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