The Russian market: New negative headlines no, but caution is still justified
A temporary lull in terms of sanctions offers hope for easing the pressure on Russian debt today (Thursday Russian CDS premium widened by 10 b.p. indicative RUSSIA 47 increased yield by 3 b.p. 10-year OFZs 18 b.p.). However, the likelihood of another bout of volatility remains significant, in light of what we recommend you keep the protective position and maintain a short duration. The optimism in the market and EM does not help the collapse in the Turkish market: the Lira dipped another 5.2% on Thursday and today in addition to 5.5%.
Money market: Calm. Exchange rate and RUONIA REPO continued to rise yesterday (REPO rate bond for the evening added 2 b.p. to 7.11%, RUONIA +7 b.p. to 7.02%) at the beginning of July averaging period. We forecast a stabilization of rates at the current levels in the absence of short term catalysts.
The OFZ market
Earnings growth may slow down, protective OFZ still favorites. The lack of new negative signals in terms of sanctions has little to calm investors in the light of the rapid rise in yields may be terminated, perhaps even decline. Against the background of high uncertainty about the situation with the sanctions, we maintain our positive view on the protective OFZ – short OFZ-PD and 24019, 29011, 52001 and 52002. However, we believe that the potential growth OFZ-PD on a short part of the curve is limited, as they are already either on the key rate’s level or above.
EPFR flows: Inflows close to zero values. Last week was recorded inflows in the amount of about $50 million, this slowed to just $4 million.
Metals & mining, fertilizers: Metallurgov again asked to share excess profits negatively. The initiative could increase the debt burden on the sector. Although the news is negative, we believe that the probability of this threat is low, since the topic of raising taxes on the sector arises not for the first time, however, never led to serious consequences. However, the pressure on the Eurobonds of metallurgists should be intensified.
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