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August 21, 2006
ING Wholesale Banking Russia Russian Fixed Income daily
Description
FX and money market On Friday, trading activity in the Russian FX market was impressively high with volumes of US$3.8bn – twice as high as the 2006 average to date. The CBR continues to support the dollar and keep the rouble stable against the bi-currency basket, successfully holding off speculator attack. With full liberalisation of the capital account operation, we believe speculative attacks on the rouble could become more frequent (there have been two in the first half of August!). The market remains very positive on the rouble in general, which strongly supports macroeconomic fundamentals – and we fully share this optimism. The CBR is likely to become even more ‘tolerant’ to rouble appreciation. For example, last week it released its Monetary Programme for 2007, where the CBR has not clarified its targets on real effective appreciation (the bank has determined a range of 0-10%) – for the first time ever. In addition, the CBR stressed that appreciation will depend strongly on the inflation trend, while its inflationary target for 2007 is very ambitious at 6.5-8.0%. The government has not accepted the programme and asked the CBR to clarify appreciation targets, but the CBR’s intention to consider the inflationary target as the only priority sends this message to the markets and the government, making rouble appreciation more likely in coming months. In the short term, the market also remains positive on the rouble with short dollar positions. Nevertheless, players have become more flexible and fixed their profits more often, using the current volatility of the exchange rate (last week, the day-to-day fluctuations exceeded 10 kopecks). With massive dollar sales last week, we see some shortage at the beginning of this week: overnight dollar swap rates spiked to 7.5%, which contrasts with rouble interbank rates. Although big tax payments (VAT) are scheduled for the beginning of the week, rouble liquidity remains very strong. Overnight rates remain in the range 1.0-1.5% and we do not expect any significant liquidity squeeze this week. Today, the euro strengthened above US$1.285/?, which makes us optimistic on the rouble against the dollar today. We see it in the range US$26.66-26.72. Rouble bond market The last day of the week was active in the rouble debt market, although movements in the government segment were insignificant and the main interest concentrated on the corporate sector where a price rally was seen, especially in the first tiers: RZhD-5, RZhD-6, RZhD-4, FSK UES-3. The key driver of first tiers remains increasing non-resident demand for good quality papers in anticipation of rouble appreciation while local players, on the back of rouble liquidity and a lack of blue chips, are increasing their demand in second-tier papers particularly from the banking and telecommunication sectors. External markets continue to grow while the spread of Russia’30 over US10Y remains stable at around 102bp and the spread of OFZ46018 over Russia ’30 has widened to 82bp. Local rouble debt is growing with a lag regarding Russian Eurobonds, resulting in a widening of its spread, however, we expect that it has some room for narrowing in the short term, promising upside for long-term rouble government papers. Scheduled for this week, the speech of Federal Reserve Chief, Ben Bernanke, will grab market attention as players seek indicators from US monetary policy. His comments could increase volatility in the markets. This week, the primary market is likely to take a breather after rich placements last week (RBL3bn compared with RBL10bn). We expect market sentiment to remain positive on the local debt market. This week’s tax payments (VAT due on Monday and excise tax on Friday) are unlikely to cause a strong shortage of rouble liquidity (this morning overnight interest rates were at 1%) and as a result, the impact on rouble debt will be small. Inflation in August Consumer prices rose by 0.1% in the first half of August In the first half of August, consumer prices rose by 0.1% - which is high taking into account that seasonal factors are very supportive for a deflation scenario. The inflationary trend has become crucial after some acceleration in inflation in July to 0.7% (MoM), or 9.5% (YoY). The government has been very optimistic on its slowdown in August-September, which should make the revised target of 9% easily achievable. However, gasoline price acceleration and a less-than-expected fall in fruit and vegetable prices may ruin these expectations. If monthly inflation remains positive in August, which will result in further acceleration in CPI in annual terms, it will strengthen the CBR’s incentive to allow a new jump of the rouble against the bi-currency basket. Nevertheless, the government is currently trying to use administrative methods to limit price growth. It hopes to introduce caps for retail and perhaps wholesale prices on crude and crude products – similar measures were introduced in 4Q05 and this helped to curb inflation, although the effect was rather short lived. In 4Q05, the government also froze tariffs which remain under its control (natural gas, electricity, communal and so on). This is hardly possible in 2006. For example, it has already been announced that retail liquid gas tariffs will go up by 100% and then by 30% from 1 January 2007, which is in line with the approved plan on further liberalisation of gas sector. Investment implications: In August, inflation figures may disappoint the government and the CBR, pushing them towards a new jump of the rouble against the basket.
VTB Capital MNB Daily Market Comment
August 18, 2006
B&N Bank Russian CLN Market Data (18/08/2006)
ING Wholesale Banking Russia Russian Fixed Income daily
Description
FX and money market Yesterday, the rouble rebounded to RBL26.7177/USD (tom) and gained 5 kopecks, as expected. Trading volumes were below average in 2006 and amounted to US$1.7bn. The market remains positive on the rouble although today we expect a light correction as the euro has weakened a bit. Today, we see the rouble in a range of RBL26.72-26.77/USD. In the money market, rouble liquidity remains solid with an overnight rate around 1.25%, and we do not expect a rouble liquidity squeeze today. Rouble bond market Yesterday was a day of primary placements with total amount of RBL10bn, which was fully absorbed by the market. Unsatisfied demand flew out on the secondary market: growth was seen in short- and long-term government bonds, Moscow-39, MosReg-5 and 6. In the first-tier sector some players decided to fix profits after the recent rally (Gazprom-4 (-3bp), FSK UES-2 (-8bp) although was not aggressive. In general, the market was supported by positive moods coming from external markets (Russian sovereign Eurobonds continued to grow, keeping the spread stable at 102bp against US10Y) and vigorous rouble liquidity with overnight interest rates at 1%. Today we expect the positive mood to remain in the local debt market especially before the weekend when investors usually pick up bonds to enjoy accrued coupons. Next week Russian companies will pay VAT due on Monday and excise tax on Friday. However, we do not expect any strong shortage of rouble liquidity and as a result, the impact on rouble debt is likely to be tiny. Results of new corporate placements Samara region fully placed its third bond issue of RBL4.5bn maturing in five years. The coupon rate was set at 7.6%, which corresponds to a YTM of 7.82% lying in the range of lead managers (7.78-8.08%). The region is rated by S&P and Moody’s at BB- and Ba2, respectively. SUN Interbrew Finance fully placed its second bond issue of RBL4bn, three years to maturity. The fixed coupon rate was set at 8%, which corresponds to a YTM of 8.16%. Funds raised will be used to refinance its first bond issue of RBL2.5bn and short-term debt. On 15 August the company paid back its first bond issue worth RBL2.5bn. In addition, it is going to issue third and fourth bond issues with total amount of RBL7bn. Record jump International reserves gained an impressive US$10.1bn(!) last week. International reserves impressively jumped by US$10.1bn (close to Russia’s monthly current account surplus!) last week and reached US$277bn at 11 August 2006. These impressive figures were expected – after very aggressive dollar purchases on 10 August. That day non-residents, who had been expecting further strengthening of the euro, increased their dollar sales. Exporters also increased their sales, seeing the CBR’s strong support of the dollar, aiming to prevent rouble appreciation and another jump against the bi-currency basket. Trading volumes were more than impressive at US$8.6bn, of which the lion’s share (more than US$8bn) was bought by the CBR to prevent rouble appreciation against the basket. The next CBR report may show a drop in reserves, as this week the CBR began pre-payments of the Paris Club debt (today is the deadline for the euro part of the debt to be pre-paid). With full liberalisation of capital account operation, the speculative attack on the rouble could become more frequent – speculation on a new potential jump in the coming days continues to circulate in the market, but we believe this is not the most likely scenario. Although the CBR is not happy with an accelerated accumulation in reserves, it is likely to continue in the coming weeks when the CBR completes the Paris Club debt pre-payment and conversion of the main part of the stabilisation fund into hard currencies. Investment implications: Reserves are more than sizeable, which should help to protect the economy from any external shocks. Market sentiment regarding the rouble remains positive and appreciation pressure is high. The CBR will continue to limit its appreciation and buy more dollars into its reserves. We maintain our forecast for reserves at US$270bn by end-2006.
Fitch Ratings Country Ceilings
VTB Capital MNB Daily Market Comment
August 17, 2006
KIT Finance Investment Bank "THE WHOLE TRUTH ABOUT GT HPP ENERGO" (Eng)
ING Wholesale Banking Russia Russian Fixed Income daily
VTB Capital MNB Daily Market Comment
August 16, 2006
VTB Capital MNB Daily Market Comment
ING Wholesale Banking Russia Russian Fixed Income daily
August 15, 2006
B&N Bank Banking Sector - The way to Play Russia\'s Macro Outlook
KIT Finance Investment Bank FIXED INCOME WEEKLY 32, 2006 (Eng)
ING Wholesale Banking Russia Russian Fixed Income weekly. Story of the week: Appreciation versus inflation
ING Wholesale Banking Russia Russian Fixed Income daily
Universal Investment Group Review of Ukrainian Economy & some of its industries over 1-st half 2006
VTB Capital MNB Daily Market Comment
August 14, 2006
ING Wholesale Banking Russia Russian Fixed Income daily
Description
FX and money market Last week, the situation in the Russian FX market was very far from quiet. Non-residents who had been expecting further strengthening of the euro increased their dollar sales. Exporters also increased their sales, seeing the CBR’s strong support of the dollar, aiming to prevent rouble appreciation and another jump against the bi-currency basket. Last Thursday, trading volumes were more than impressive at US$8.6bn, of which the lion’s share (more than US$8bn) was bought by the CBR. Indeed, the government demand for dollars is very strong in August as the CBR is converting the stabilisation fund from roubles into dollars and, in addition, is preparing for the Paris Club debt pre-payments of US$22.3bn. The CBR needed to accumulate more dollars in its reserves in August – but had always stressed that this would be done outside of the market. Nevertheless, the market was excited by the fourfold increase in trading volumes and the CBR’s ‘persistence’. Although the situation calmed down on Friday as expected, speculation was revived on a new potential move against the currency basket in the very short term: short on dollar positions of the main players spiked to US$10-11bn. Fully sharing this optimism of the rouble in the long term, we believe the jump is not the most likely scenario for the coming days. Today, the rouble remains stable against the bi-currency basket. With some rebound of the dollar to US$1.275/?, the rouble slid to RBL26.82-26.83/US$ and we expect it to stay in the range RBL26.79-26.84/US$. In the money market, rouble liquidity remains very good (which is not surprising after huge dollar sales last week) with overnight rate at 1.5%. Rouble bond market On Friday, the rouble bond market remained in a good shape with positive bond price movements in all three sectors. Good demand continued in the first-tier sector which was the main driver of the local market last week. Very healthy rouble liquidity (due to recent sold of more than US$8bn to the CBR) and expectations of rouble appreciation are creating demand on rouble papers. Our view for the upcoming week is neutral with some price upside, and forthcoming tax payments is unlikely to have any negative impact on the market. After the past week of respite, this week’s primary market should revive with all placements scheduled on Thursday, when RBL10bn will be offered to the market. On Friday, US treasuries debt prices fell after stronger-than-expected July retail sales and this morning US10Y is trading at 4.98%. Following to the external markets, Russia ’30 also has dropped with rising yield to 6.03%. As a result, the spread of Russia ’30 over US10Y is at 105bp, while the spread between OFZ48018 and Russia ’30 is 67bp. Upcoming new placements On 17 August, Samara region is going to place its third bond issue of RBL4.5bn maturing in five years. Currently, the second bond issue is trading in the market (RBL2bn, maturing in 2010). The region is rated by S&P and Moody’s at BB- and Ba2, respectively. On 17 August, SUN Interbrew Finance, a branch of large beer producer Sun Interbrew Ltd, is planning to place its second bond issue (three years to maturity) of RBL4bn. Currently, its first bond issue, maturing on 15 August, 2006, is trading in the market. Raised funds will be used to refinance its first bond issue and short-term debt. Initially the bond will be traded to two years put option and lead managers are expecting YTP at 8.5%. On 16 August, the CBR is planning to auction OFZ 46017, which is already trading on MICEX. Parameters of OFZ 46017: size offered: RBL10bn, term to maturity: 10 years, quarterly step-down coupons, current coupon rate 9%, modified duration 6.4 years. Currently, the amount outstanding of OFZ 46017 is RBL60bn, Friday’s average yield was 6.67%. The last large auction for the paper took place on 17 May, when RBL9.97bn of the RBL10bn offered was sold with an average yield of 6.83% and a cut-off yield of 6.85%. Taking into account, that the bond is rather liquid, we do not expect that Minfin will offer premium over the current market position. More optimistic on GDP growth The government continues to upgrade its view on GDP growth in 2006 – 6.6% now Last week, the Ministry of Economic Development and trade upgraded its forecast of GDP growth to 6.6% in 2006. It was not surprising as recently the ministry has become much more optimistic on the oil price trend in 2006-07 and upgraded Urals forecast to USD$65/bbl and USD$61/bbl in 2006 and 2007, respectively. Although the direct effect of higher oil prices to GDP growth has become less clear – its indirect impact via higher domestic demand and income effect remains absolutely crucial. This was not the first upgrade this year. While the 2006 growth target remains unchanged at 5.9%, the ministry updates its view on actual performance and short-term forecasts on a monthly basis. We share the government’s optimism on economic growth in 2006 and beyond and maintain our view at 6.3% for 2006 – with a positive outlook. Investment implications: The actual economic performance steadily exceeds the targeted indicators, which resulted in a series of upgrades. The government is becoming more and optimistic and we can share this optimism. We maintain our view of GDP growth at 6.3% in 2006 – with a positive outlook.
VTB Capital MNB Daily Market Comment
UkrSibbank CityCom LLC. Company profile.
FC URALSIB Fixed Income Weekly:
- Sun Interbrew
- OFZ 46017
Description
SUN Interbrew SUN Interbrew is the second largest (after Baltika – direct competitor) beer producer in Russia. The company was jointly founded by «SUN Brewery» and «Interbrew limited» in 1999. SUN Interbrew operates 8 breweries throughout Russia, owns 6 malt-houses, consolidated net sales of the company totalled US$851m in 2005. We think that SUN Interbrew-2’09 should be placed with premium of 30bp. to the synthetic curve, drawn between Baltika’07 and WBD-2’10. The fair yield for the 3-year SUN Interbrew should locate around 8.35%-8.60%. SUN Interbrew credit quality, if compared to Baltika and WBD – is in gen-eral worse than Baltika or WBD credit, though in terms of EBITDA margin SUN is significantly better than WBD. Moreover, unlike SUN Interbrew WBD (B+/B3) has ratings from rating agencies. OFZ OFZ 46017 offered size is RBL10bn while the amount outstanding of this paper is RBL59bn. It is a fixed-coupon bond with maturity in 2016 and a modified duration of about 6.4 years. The previous auction for OFZ 46017 took place on 17 May, when RBL9.97bn of the offered RBL10bn was sold to the public at an average yield of 6.83% and a cut-off yield of 6.85%. On Thursday OFZ 46017 was quoted at approximately 6.68%, so this time we recommend placing orders at 6.71-6.76%.
August 11, 2006
VTB Capital MNB Daily Market Comment
August 10, 2006
ING Wholesale Banking Russia Russian Fixed Income daily
Description
FX and money market Yesterday, following the euro, the rouble gained 2 kopecks and reached RBL26.7053/USD. Trading volumes in the Russian market were higher than average at about US$2.4bn. Today, we expect the rouble to continue strengthening as the euro is appreciating. We expect to see the rouble in the range RBL26.64-26.69/USD today. In the money market, rouble liquidity remains good with overnight rates at 2.5% which is quite a sustainable level for this week. Rouble bond market On Wednesday, a pause in the US monetary tightening cycle was met rather neutrally in the external market, and this mood also extended to the rouble debt market. Most price movements were tiny on calm trading, while demand for long-term good quality papers continued: Moscow-39 (+12bp), MosReg-5 (+18bp), FSK UES-2 (+18bp). Before mid-August when the tax-payment period begins, the local debt market is likely to remain in good shape. Today our view on the market is neutral with a positive shade. Although the local debt market is well supported by healthy rouble liquidity, and expectations of rouble appreciation, it is still looking around at external markets. There is still uncertainty over the Fed’s policy direction in upcoming months and further policy will remain data-dependent. The next important figure is due on 16 August, when US CPI is published. Spread Russia’30 over US10Y shrunk to 105bp from 107bp. The spread between the long end of the OFZ curve and the Russian sovereign dollar curve, which measured between OFZ48018 and Russia ’30, is at 74bp slightly wider than yesterday morning’s level of 72bp. We believe that this spread has some room to drop by the end of the year due to expectations of rouble appreciation and removal of capital controls. Upcoming OFZ auction On 16 August the CBR is planning to auction OFZ46017, which is already trading on MICEX. Parameters of OFZ 46017: size offered: RBL10bn, term to maturity: 10 years, amortised structure, quarterly step-down coupons, current coupon rate 9%, modified duration 6.4 years. Currently, the amount outstanding of OFZ 46017 is RBL60bn, yesterday’s average yield was 6.68%. The last large auction for the paper took place on 17 May, when RBL9.97bn of the RBL10bn offered was sold with an average yield of 6.83% and a cut-off yield of 6.85%. We do not expect that participants will demand a large premium over the current market position. Fiscal performance looking good In January-July, the budget surplus amounted to 3.4% of GDP (8.7% on a cash basis). Yesterday, the MoF reported on the fiscal performance for January-July 2006, which as expected was very favourable, with budget revenues spiking to RBL3,460bn (US$129.6bn). The budget surplus was also impressive at RBL494.4bn, or 3.4% of GDP, which had been expected. What raises some concerns is that the gap between budget expenditures on an accounting basis and budget expenditures on a cash basis is widening and reached RBL763.2bn – a historical high. This happened because the MoF ‘postponed’ RBL763.2bn (US$28.6bn) of expenditures that were entered on the accounting books but not spent in cash. Although this is quite a common method for additional sterilisation, the MoF must make all of these expenditures in cash in 2006, thus also adding to inflation later. Usually, the MoF prefers to approve this expenditure in November-December. As such, this year we can expect a flood of liquidity at the end of the year. We remain very optimistic on the fiscal figures for 2006 as a whole and maintain our view for a fiscal surplus of 5% of GDP (RBL1,300bn). So far, the MoF has successfully resisted attacks to dramatically increase budget expenditures. Although further fiscal softening looks unavoidable, in particular in 2007 due to the parliamentary elections, strong appreciation of the rouble should significantly reduce actual inflationary consequences. Investment implications: Fiscal performance in January–July was sufficiently strong with a budget surplus of 3.4% of GDP. We can expect very strong liquidity in the market at the end of the year as currently the gap between expenditures on an accounting basis and cash basis has reached the remarkable level of RBL763.2bn. We maintain our forecast for a budget surplus of 5% of GDP in 2006.
VTB Capital MNB Daily Market Comment
August 09, 2006
ING Wholesale Banking Russia Russian Fixed Income daily
VTB Capital MNB Daily Market Comment
August 08, 2006
ING Wholesale Banking Russia Russian Fixed Income daily
Description
FX and money market Yesterday, following the euro, the rouble gained 6 kopecks and reached RBL26.7015/USD. Trading volumes in the Russian market were close to average at about US$1.9bn. Today, the rouble is likely to remain stable against the bi-currency basket, which is the consensus view of the market. As the euro slightly corrected to around USD1.28-1.283/EUR, the rouble dropped to RBL26.75/USD in morning trade. The global FX markets are waiting for the Fed’s decision on the rate (a pause in rate hikes has already been priced in, making comments on the issue even more important), which will make the market quiet up to the announcement. We expect the rouble in the range RBL26.72-26.78/USD today. In the money market this week interest rates are likely to be above the 2006 average due to the CBR’s attempt to push rates up (it increased its deposit rates by 0.5ppt from 7 August 2006). Overnight rates have got a new level of ‘support’ at 2%, and today they reached 2.5-3%, which is quite a sustainable level for this week. Rouble bond market After Friday’s growth and active trading, Monday was calmer with prices moving without any clear tendency. Some first-tier corporate bonds continued to grow while movements were rather cautious. Trading activity was low as markets stood motionless before the FOMC meeting scheduled for today (minutes of which will be released at 22:15 Moscow time), and players had no intention to make any sharp steps. There is still uncertainty about the Fed’s decision and, more importantly, the comments accompanying its decision. Today we expect prices to remain stable around current levels. Spread Russia’30 over US10Y was slightly reduced to 105bp, while spread OFZ46018 over Russia’30 narrowed from 78bp to 76bp. After the CBR decided to raise its deposit rates by 0.5ppt from 7 August 2006, overnight rates rose to 2.5-3% but this is still not too expensive and has had no impact on the local debt market. A new spike in CPI In July, CPI accelerated to 0.7% MoM, or 9.5% YoY, though this is not alarming. Yesterday, the FSSS released its inflation figures for July 2006, which were disappointing for the government. Consumer prices rose 0.7% MoM, or 9.5% YoY in July – a significant acceleration from a modest 0.3% MoM, or 9.2% YoY in June and exceeding market consensus of 0.5% (9.3% YoY). Core inflation also accelerated from 0.3% MoM in June to 0.5% in July, making the situation even more unpleasant. Food inflation (0.9% MoM) was the main driver of price growth in July while services inflation remained under control at 0.6% MoM. Nevertheless, we believe that further acceleration in inflation is avoidable. In July, we traditionally see an increase in fruit and vegetable prices (just before the domestic harvest hits the stores) and sugar, which makes this inflationary spike not an alarming one. We strongly believe that appreciation of the rouble against the dollar remains essential for a slowdown in inflation. Nominal appreciation immediately reduces inflation expectations and stimulates demand for roubles. Our calculations show that each 3% of nominal appreciation helps to remove 1pp from annual inflation, while the rouble has appreciated by 6.8% from the beginning of 2006. Unfortunately, Russian data releases are not particularly important for short-term decision-making and it is not clear whether the government and the CBR will react to the current acceleration in inflation – but they probably won’t react immediately. We fully agree that if the CBR allows the rouble to appreciate to 26/USD this year, CPI is not likely to exceed 9%. As such, we expect one or two potential jumps of the rouble against the bi-currency basket in 2H06. Investment implications: The acceleration in inflation increases the incentive to allow rouble appreciation against the basket in the coming months, although we do not expect the CBR’s reaction to be immediate. We maintain our forecasts for the rouble at 26/USD and CPI at 9% by year-end and expect to see a seasonal drop in prices in August-September.
Alfa Bank Alfa-Bank`s Fixed Income Weekly: ECB Outcomes, Pre-FOMC Trends, Trading Ideas
Description
Our expectations: NEWS OF THE WEEK „П ECB and Bank of England increase refinancing rates „П July inflation reported at 0.7%, August deflation and 9% annual target under threat „П Exchange and money markets Market liquidity remains within the norm and in the absence of major placements and payment the focus is on the news from the Fed. In the event of a pause in the rate-hike cycle and a statement on its termination, we do not exclude the possibility of ruble appreciation to R26.5-26.6/$. „П Ruble bonds market The market will consolidate at current levels. All eyes are focused on external market and Fed`s decision. No serious payments and issues scheduled for the week. Svyazinvest telecoms still have upside potential. „П Eurobond market Emerging markets are in a stable growth phase and only an unpleasant FRS surprise could send them off-course. We maintain our positive forecast given the support by the resources and FOREX markets, related emerging markets that are counting on BrazilЎ¦s sovereign rating upgrade. We believe that the high-duration metallurgy complex bonds (Evrazholding-15, Severstal-14), Gazprombank-15 are still undervalued.
VTB Capital MNB Daily Market Comment
B&N Bank Russian CLN Market Data
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