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Local sovereign debt: under pressure


Pressure on the OFZ market increased yesterday, with the long end slipping a further 0.4-0.5pp and shorter tenors losing 0.15-0.35pp, price-wise. Hence, the curve shifted up 10bp in yield, while long yields approached 11.0%.

OFZ auctions saw solid demand, but as we expected the Ministry of Finance decided not to offer any premium to the secondary market, placing only RUB 4.9bn in RUONIA-linked RFLB 25. Meanwhile, the whole size of bullet RFLB 28 was allocated (RUB 5.0bn), with the average yield printing 10.81%. There is still one auction left in 2Q15, while MinFin needs to place RUB 18bn to execute the 2Q15 borrowing plan in full. Based on the maturity breakdown, MinFin would offer 5-10 year papers, likely RFLB 23 or floater RFLB 20.

Maxim Korovin, Tatiana Zueva
VTB Capital analysts


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