Fixed Income Analysis /
Russia

Alfa Fixed Income Weekly: Ruble Bond Market

  • The RGBI index added 8% last week and the OFZ Curve dropped by 18-23 bp

  • On Thursday the Minfin informed that it would be ready to publish OFZ auctions` schedule for 2Q22

  • Corporate sector: corporate bond yields were in a range of 14% - 30% on a weekly basis

Elizaveta Naumova
Elizaveta Naumova

Senior Fixed Income Analyst

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Alfa
6 April 2022
Published byAlfa

The RGBI index added 8% last week and the OFZ Curve dropped by 18-23 bp. As a result, short papers closed the week at 13-14%, middle ones at 11.5-12% and long issues at 11.5%. Trading volume again were a bit lower than the previous week, totaling RUB 37 bn. However, it is worth mentioning that such volumes are not high compared to the RUB92 bn on average in 2021. It means that not all participants are in place (non-residents are not allowed to participate in trading) and the market itself could be viewed as rather thin. It is unlikely that these levels of OFZ(s) could be maintained this week, unless the CBR decides at least to declare about possible rate cut to 15% in the nearest future, i.e. to the levels of short papers. However, such a scenario should not be ruled out – to remind, the key rate growth to 20% was a forced step, targeted at banking system stabilization and termination of liquidity withdrawal by depositors. Now the uncertainty is gradually disappearing, the initial shock has passed away and the economy began to adopt to a new environment. Ruble rate as of Friday evening strengthened to RUB 84/$US from its peak of RUB 120+ in the beginning of March, MoEx opened the door for trading, gradually widening list of available assets. Thus, it is very likely that the market has a right view and the stabilization of the situation will lead to the CBR rate cut in the nearest future. On a separate note, on Thursday the Minfin informed that it would be ready to publish OFZ auctions` schedule for 2Q22 after it makes decision to resume them. The resumption of auctions – is another step towards normalization of the situation and building up of trade volumes.

Corporate sector: corporate bond yields were in a range of 14% - 30% on a weekly basis. The lowest levels – 12-15% – were set by the issuers from the defensive, less vulnerable to sanctions, sectors including retailers (Magnit, Lenta, X5, M-Video, Detsky Mir) and telecoms (MTS, Rostelecom, Megafon). Low yields also demonstrated diversified players with conservative financial policy and coherent strategy, such as RZHD, AFK Sistema, Segezha Group and others. A bit higher yields showed large issuers being in contact with sanctions – for example, leasing companies. Europlan, Baltisky leasing closed at 20%+. In real estate sector first-tier players, such as PIK, Samolet, LSR also closed at 20%+. Second-tier players, such as G-Group, Brusnica, Legenda, already closed at 25%+. The lowest yields – from 30% – had players with either elevated sanction risks (Softline trade) or with weak credit profiles (Maxima Telecom).