11 Jan 2019 19:35

Russian Eurobond prices up substantially in week on higher oil and demand for EM assets

MOSCOW. Jan 11 (Interfax) - Most Russian Eurobond issues posted significant gains at the start of 2019 amid higher oil prices and increased demand on the part of international investors for emerging market (EM) assets on expectations of the outcomes of U.S.-China trade talks and announcements by U.S. Federal Reserve officials on caution with respect to toughening of monetary policy.

US Treasuries were largely unchanged compared with the start of the year, and sovereign spreads narrowed considerably.

In the week as a whole the benchmark Russia-30 bond rose 0.63% in price to 109.97%. Spread between these and four-year US Treasuries narrowed 15 bps and stood at 164 bps on January 11.

The 2043 bond rose 3% in price, with yield down 22 bps to 5.23% per annum; the 2042 bond was down 2.64% - spread between these and UST with the same maturity narrowed 18 bps to 244 bps; the 2047 bond rose 3.7% to 96.95%, with yield down 26 bps to 5.46%; and the 2023 bond fell 0.64% with spread widening 11 bps to 113 bps.

The ten-year Eurobond maturing in 2027 rose 1.8% to 97.07%, with yield down 26 bps to 4.67%; the 2026 bond rose 2%; the 2023 bond was up 1.34%, with spread between these and UST narrowing 15 bps to 157 bps, and the 2020 up 0.3%.

The Russian Eurobond market will likely cease active growth in the week to come and will begin trading sideways amid ambiguous signals from international capital markets and expectations of accelerated inflation in Russia in early 2019, the Interfax Center for Economic Analysis said.

After fairly active growth at the start of the year, the situation in international capital markets may settle somewhat by mid-January as all principal positive factors, including trade talks between the U.S. and China, U.S. Federal Reserve announcements on restraint in toughening monetary policy, reduced oil production by OPEC+ nations will be accounted for by that point. At the same time, uncertainty with respect to U.S. government shutdowns due to disputes between the U.S. president and legislators on the 2019 budget will likely remain, the Center said.