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June 09, 2014
UFS IC

АЛРОСА, НМТП. Российский долговой рынок показал уверенный рост в пятницу

Description
Мировые рынки и макроэкономика ·    Во Франции прошли короткие встречи Владимира Путина с новым президентом Украины Петром Порошенко и лидером США Бараком Обамой. Инвесторы надеются на долгожданное урегулирование украинского кризиса. ·    В Америке в пятницу вышли важные данные по безработице, результат остался на уровне предыдущего значения и лучше ожиданий, безработица в мае составила 6,3% против прогнозировавшегося увеличения этого показателя до 6,4%. ·    Торговый баланс Китая за май показал рекордное значение. $35,9 млрд., против прогноза в $22,6 млрд. и предыдущего значения в $18,5 млрд. ·    Сегодня пройдет трехсторонняя встреча в Брюсселе Россия-ЕС-Украина по газу.   Долговой рынок ·    Российские еврооблигации в пятницу показали уверенный рост на фоне снижения геополитической напряженности после визита президента России Владимира Путина во Францию. ·    Доходность российского выпуска RUSSIA-23 в пятницу снизилась на 17 б.п. до 4,35%, а доходность дальнего евробонда RUSSIA-43 сократилась на 20 б.п. до 5,28% годовых. ·    Спред RUSSIA-23-UST-10 сократился в пятницу на 18 б.п. до 178 б.п. В начале текущего года спред RUSSIA-23-UST-10 составлял порядка 160 б.п. а в конце апреля и начале мая его значение составляло порядка 300 б.п. ·    В начале текущей недели ожидаем сохранения умеренно-позитивной динамики на рынке российских еврооблигаций. ·    Торговую неделю локальный рынок долга завершил умеренным ростом на максимальных с начала июня оборотах.    Комментарии ·    Агентство S&P в пятницу подтвердило рейтинг компании АЛРОСА на уровне «BB-» со «стабильным» прогнозом. Таким образом, агентство не стало снижать рейтинг компании, который с февраля этого года находился на пересмотре с «негативным» прогнозом. Решение S&P не снижать рейтинг АЛРОСА на фоне того, что компании удалось рефинансировать краткосрочный долг, безусловно, является позитивным фактором для котировок обращающихся евробондов компании. Тем не менее, учитывая, что компания договорилась с банками о рефинансировании уже полтора месяца назад, реакция в еврооблигациях АЛРОСА на решение S&P будет до некоторой степени сдержанной. Потенциал снижения доходности евробонда  ALRSRU-20 (YTM – 5,68%, Z-спред – 366 б.п.) составляет порядка  20-30 б.п. в среднесрочном периоде. ·    НМТП опубликовал отчетность по МСФО за 1К14.  Ждем нейтральной реакции рынка.
June 06, 2014
UFS IC

VimpelCom, Alfa-Bank. Russian debt market rose on Thursday amid easing of the ECB monetary policy

Description
Global Markets and Macroeconomic News ·         The main event of this week took place yesterday – the ECB meeting. As expected, the key interest rate was reduced, but to 0.15%, not to 0.1% ·         There were submitted the data on jobless claims in the United States, they were worse than expected, 312 thousand against 309 thousand. ·         American markets keep growing rapidly, the Dow Jones and S&P 500 again reached new highs. ·         The data on inflation in Russia were published. In May this indicator demonstrated the value of April and amounted to 0.9%. ·         The currency market indicated the turn, which was forecast by us. ·          The cost of the bi-currency basket fell by 28 kopecks and made up 40.57 rubles     Debt Market ·         Russian Eurobonds appreciated on Thursday amid growing risk appetite in connection with the decision of the ECB to ease the monetary policy. ·         The yield of Russian issue RUSSIA-23 decreased on Thursday by 4 b.p. to 4.56%, and the yield of long Eurobond RUSSIA-43 decreased by 5 b.p. to 5.48% per annum. ·         In the course of trading on Friday we expect moderately positive dynamics in the market. The main event will consist in the publication of data on the US labor market. ·         Among the news of the primary market we note the reports that VEB is considering the possibility of placing Eurobonds in Euro after a successful transaction of Alfa-Bank. ·         The market of local bonds finished the day with growth. ·         The Lipetsk region conducted the placement with oversubscription by 4 times. TransFin-M prepares the placement of bonds series BO-24.   Comments ·         According to Reuters, Hong Kong Corporation Hutchison Whampoa has resumed negotiations with Vimpelcom Ltd. on the merger of the Italian assets. If the transaction takes place, the part or all of the debt of Wind can be deconsolidated from the debt of VimpelCom, and the debt load of the company may be reduced to 1.5-1.6x Net debt/EBITDA from the current level of 2.8-2.9x. We expect the news will support the Eurobonds of the Issuer, and find interesting issue VIP-22 (YTM – 6.54%, Z-spread 433 b. p.), traded with the highest premium to swaps in comparison with other securities of VimpelCom. The potential for the yield reduction of the issue is 30-40 b. p. in the medium term. ·         Alfa-Bank will conduct on June 9 the book building of 3-year bonds series BO-10 in the amount of 5 billion rubles. We recommend you to participate in the offering taking into the fair yield to put option at the level of 9.3 to 9.5% per annum.
June 05, 2014
UFS IC

Alfa-Bank, Peresvet Bank. The debt market is waiting for a decision of the ECB.

Description
Global Markets and Macroeconomic News ·         On Wednesday there were submitted the data on the trade balance of the USA – the value of -$47.2 billion was significantly lower than the forecast. ·         Crude oil stocks in the US fell by 3.4 million barrels, forecast reduction – just 0.2 million. ·         Change in employed in non-agricultural sector was worse than the forecast, 179 thousand against 217 thousand. ·         The main event of the day is the meeting of the European Central Bank at 15:45 Moscow time, at which it is expected the reduction of the key rate from 0.25% to 0.1%. ·         In regard to yesterday's news from the G7 summit we highlight that the countries of the G7 expect new sanctions against Russia, though put off this measure for the future.   Debt Market ·         Russian Eurobonds showed on Wednesday a decrease, continuing the correctional movement after the strong growth in May amid continuing uncertainty in the gas trade with Ukraine. ·         The yield of Russian issue RUSSIA-23 increased on Wednesday by 9 b. points to 4.56%, the yield of long Eurobond RUSSIA-43 increased by 7 b.p. to 5.52%. ·         On Thursday the main market event will be the results of the ECB meeting, from which the market is waiting the mitigation of the monetary policy. In addition, investors are waiting for Friday's data on the US labor market. ·         On Wednesday there took place the first in the second quarter placement in the primary Eurobond market – a 3 year issue in euros was placed by the parental structure of Alfa-Bank, ABH Financial Ltd. ·         The index of ruble bonds closed near on Thursday previous levels. ·         Peresvet Bank enters the public debt market; LOCKO-Bank holds a secondary placement.   Comments ·         The holding company of Alfa Bank, ABH Financial Ltd., placed on Wednesday a 3-year Eurobonds in the amount of 350 million euros at 5.5% per annum, which corresponds to the premium to swaps at the level of 505.2 b. p. Initial yield guidance was 5.75-6.00% per annum, but in the course of book building it was twice reduced, first – to 5.625%, and later – to 5.5% per annum. Considering the difference in the ratings of ABH Financial and Alfa-Bank, which partially offsets the conditions of cross-defaults, the premium to the fair yield makes up about 130 b. p. By results of the placement we maintain our expectations for the growth of the value of the Eurobond after the beginning of circulation in the secondary market. ·         Peresvet Bank enters the market of the public debt with the debut issue of bonds in the amount of 2 billion rubles. The first coupon rate is set at 12.25-12.50% per annum, which corresponds to the yield to the half-year offer of 12,63-12.90% per annum. According to our estimates, the fair rate of return is in the range of 11.0-11.2% per annum. We see the potential for its reduction and recommend you to participate in the offering.
June 04, 2014
Cbonds EM

Cbonds EM Monthly Newsletter, May 2014

Description
Cbonds EM Monthly Newsletter, May 2014
UFS IC

IBA, Bank Saint Petersburg, the banking sector. The Eurobond market was on Tuesday under the pressure of the falling US Treasuries

Description
Global Markets and Macroeconomic News ·         Yesterday there were submitted the data on the consumer price index in the Eurozone. They were worse than the previous values and expectations, which made up 0.7%, the new value is 0.5%. ·         The Bank of Japan, as expected, left its key interest rate at 2.5%. ·         In the Russian FX market there continues the rally of major currencies against the ruble, the Russian currency is weakening for 6 consecutive days and the probability of correction is very high.   Debt Market ·         Russian Eurobonds showed on Tuesday a slight decrease against the persistent pressure from falling US Treasuries. ·         The yield of UST-10 increased on Tuesday by 7 b.p. to 2.60% per annum, whereas last week it declined to the level of 2.40% per annum. ·         The Eurobond market continues to remain at the levels last week due to the absence of progress in the gas issue between Russia and Ukraine. ·         In the course of trades on Wednesday we expect lateral dynamics in the market of Russian Eurobonds. ·         The expectations of the outcome of the ECB meeting on Thursday are added to expectations of clarity in the gas dispute between Russia and Ukraine. ·         The indexes of the market local debt showed no expressed dynamics. ·         The Ministry of Finance places 10-year Federal Loan Bond 26215 in the amount of 10 billion rubles. ·         MIA conducts the premarketing of a new issue. We consider interesting the participation in initial placement.   Comments ·         The International Bank of Azerbaijan (IBA), a controlling stake in which belongs to the state, on Wednesday will start the canvass for the placement of 5-year senior dollar Eurobonds. Initial yield guidance of the issue is set in the range of 5.75-6.00% per annum. Given the IBA rating at "BB" and the indicative yield of the traded securities of the Bank, a new 5-year Eurobond IBAZAZ-19 may look attractive at the yield from 7.00% and above. In this regard, on the background of the designated yield guidance of 5.75-6.00% per annum, we do not think that this issue may cause an increased interest among investors and significantly rise in price after the beginning of circulation in the secondary market. Scheduled for Wednesday placement of 3-year Eurobonds in Euro of Alfa-Bank looks much more interesting (read more in the special comments). ·         The net profit of Bank Saint Petersburg under IFRS rose for the 1st quarter by 55%. We evaluate the statements as moderately positive, but we believe that its results will be ignored by the market. ·         Yesterday, S&P changed the outlook for the ratings of 18 Russian banks to "negative". Downgrades will affect first of all the banks mentioned above, but can also lead to a general reassessment by the investors of the risks of investing in the bonds sector.
June 03, 2014
UFS IC

Alfa-Bank, TransContainer, Rusfinance Bank. Progress in the "gas issue" supports the Russian debt market.

Description
Global Markets and Macroeconomic News ·         Indexes of business activity were close to expectations and did not cause significant movements in the world markets. ·         The Russian share market has considerably increased due to good news on the gas talks with Ukraine. ·         The ruble continued to weaken for the fifth consecutive day.   Debt Market ·         Russian Eurobonds showed on Monday a slight strengthening against delay of the "gas issue" between Russia and Ukraine until June 9. ·         The yield of issue RUSSIA-23 declined on Monday by 3 b. p. to 4.43%, the yield of long Eurobond RUSSIA-43 decreased by 2 b. p. to 5.42% per annum. ·         In the course of the trading on Tuesday we expect moderately positive sentiments in the market of Russian Eurobonds. ·         Market participants will pay attention to the data on industrial orders in the USA at 18:00 GMT, and will continue to assess the chances of strengthening the stimulating policy of the ECB. ·         Ruble bonds ended the day without showing single dynamics. Weak growth was demonstrated by only the public debt segment. ·         Municipal and corporate bonds indicated a symbolic decrease.   Comments ·         Alfa-Bank, through its parent company ABH Financial Ltd. may place in the coming days Eurobonds in the amount of 600 million Euros. Currently senior dollar issue ALFARU-17 is traded with a spread to swaps of 393 b. p., and although premiums to swap of Eurobonds in Euro are narrower than the premiums to swaps of dollar securities, the fact that the rating of ABH Financial is by 1-2 notches below the ranking of Alfa-Bank, probably, will compensate for a part of this traditional difference. Thus, in case of placing by ABH Financial of the senior tranche in Euro with maturity of 5 years, the fair premium to average market swaps in euros, in our opinion, may be about 370-380 b. p., which at the current level of 5-year swaps means the yield of the issue at 4.4-4.6% per annum. In case of placement of 3-year issue, the fair premium may be slightly narrower at the level of 360-370 b. p., which corresponds to the yield at the level of 4.0-4.2% per annum. ·         TransContainer has published the statements under IFRS for 1Q14.  We note the significant increase of the margin, and a moderate improvement of the credit metrics of the Group, but do not expect a decrease of the yield of the traded issues of ruble bonds TransContainer, 02 and TransContainer, 04. ·         Rusfinance Bank will conduct on June 5-6 the premarketing of the new issue of bonds series BO-08 in the amount of 4 billion rubles. We believe that demand will be formed near the lower end of the guidance landmark.
June 02, 2014
UFS IC

FESCO, Element Leasing, KIT Finance Capital. The dynamics of the debt market at the beginning of the week will be determined by the pace of the nego

Description
Global Markets and Macroeconomic News ·         The Spanish government intends to spend €6 billion to support the economy of the country. ·         Next Wednesday, on June 5, it will take place the ECB meeting, at which the reduction of key rates will be discussed.   Debt Market ·         Russian Eurobonds on Friday corrected after growth the previous days amid growing uncertainty about the supply of Russian gas to Europe. ·         On Monday morning, the Ministry of Energy of the Russian Federation confirmed the receipt of $786.4 million directed on Friday by Naftohaz. The Ukrainian party considers these funds as the debt to Russia for delivered gas in February-March. ·         The negotiations on gas between Russia, the EU and Ukraine continue on Monday, and in the course of the day, investors will be watching for incoming messages on the results of the discussion. ·         If during the day till 10 a.m. on 3 June compromise between the parties is found and gas supplies are not stopped, there may be indicated a positive reaction in the quotations of Russian Eurobonds. ·         In May the RGBI managed to win back some of the losses of the year beginning. ·         DeltaCredit and RGS Nedvizhimost will conduct the book building.   Comments ·         FESCO submitted on Friday the results of 1Q14 under IFRS. Group revenues decreased by 12% to $242 million, while EBITDA decreased by 32% to $33 million, EBITDA margin decreased by 4 percentage points to 13.5%. For the quarter, the group has shown the net loss of $13 million compared with the net profit of $22 million a year earlier. In general, the published statements of FESCO indicate some deterioration of the credit profile of the company with the decline of EBITDA and EBITDA margin. Eurobonds of the Group FESHRU-18 (YTW-13.6%) and FESHRU-20 (YTW-13.0%) significantly outpaced the market in the last 3 weeks, in connection with which released data in the short term may have a moderately negative impact on their dynamics, prompting investors to fix a part of the profit. ·         Element Leasing stopped the book building for the purchase of bonds series BO-03. We see the potential for the yield reduction of the issue and recommend the paper for purchase after entering the secondary market. ·         KIT Finance Capital will place on June 9 bonds series BO-03 in the amount of 2 billion rubles.
May 30, 2014
UFS IC

LUKOIL, MegaFon. News on EaEU and data on US GDP supported Russian Eurobonds

Description
Global Markets and Macroeconomic News ·         According to the second assessment, the U.S. GDP on a quarterly basis by results of first quarter of 2014 has decreased by 1.0%. ·         According to the final assessment, the industrial production in Japan declined in April by 2.5%. ·         The volume of oil in the Cushing terminal according to the results of the past week fell by 1.53 million barrels. ·         Russia, Belarus and Kazakhstan signed yesterday the treaty on establishing the Eurasian Economic Union.   Debt Market ·         Russian Eurobonds strengthened on Thursday against the news about the signing of the treaty on the Eurasian Economic Union (EaEU) between Russia, Kazakhstan and Belarus. ·         The market was also supported by the maintenance of Russia's balanced position on the conflict in Ukraine and the news on the weak U.S. GDP. ·         The yield of long issue RUSSIA-43 decreased by results of Thursday by 7 b.p. to 5.39% per annum, which is the minimum since the beginning of circulation. ·         On Friday we expect neutral dynamics in the market. The factor of increased expectations on a longer preservation of the fed's low interest rates will probably be balanced by the factor of profit taking before the weekend. ·         The indexes of the market local debt did not show single dynamics: the outsider – municipal segment. Issuers are interested in the primary market.   Comments ·         LUKOIL submitted on Thursday moderately negative quarterly results on the background of declining LTM EBITDA at the growth of the net debt. However, the overall credit quality of the issuer remains very high, and therefore we do not expect a negative reaction in the traded Eurobonds of the issuer. Among trade ideas in Eurobonds of LUKOIL we note issue LUKOIL-18 (YTM –3.73%, Z-spread – 252 b. p.). The yield of the issue remains by 40-50 b. p. higher than the value at the end of February, while longer issues LUKOIL-22 and LUKOIL-23 have already dropped to 20-30 b. p. below marks of the end of winter. However, due to moderately negative statements, the implementation of this trade idea may be delayed in time. ·         MegaFon reported for the 1st quarter of 2014 under IFRS. As for the credit profile, we evaluate the statements as positive, but note deterioration of profitability. The improving credit metrics of the issuer may be reflected in quotations of new issue MegaFon, BO-04 (duration 0.9 y., YTP – 9.4%), which was placed in the secondary market on May 21.
May 23, 2014
UFS IC

SIBUR, Bashneft, Center-Invest, Sberbank, Razgulay. Debt market shows lateral dynamics in expactation of elections in Ukraine

Description
Global Markets and Macroeconomic News ·      According to preliminary data, the index of business activity in manufacturing in the USA from Markit for May rose by 0.8 points to 56.2 points. ·      Initial jobless claims rose last week by 28 thousand claims to 326 thousand. ·      UK GDP in the first quarter of 2014 grew by 0.8% in quarterly terms, as expected, which is by 0.1 percentage points higher than in the fourth quarter of 2013. The composite index of business activity in the Eurozone from Markit declined by 0.1 points, as expected, to the level of 53.9 points for May, according to preliminary data.   Debt Market ·         The Russian Eurobond market demonstrated on Thursday neutral dynamics on the background of growing tensions in the East of Ukraine before Sunday's elections. ·         The yield of issue RUSSIA-23 decreased on Wednesday by 3 b. p. to 4.57% per annum, and the yield of long Eurobond RUSSIA-43 decreased by 1 b. p. to 5.63% per annum. ·         On Friday we expect lateral dynamics in the market. A positive factor of the expansion of economic cooperation with China is outweighed by concerns about the escalation of tensions in Ukraine. ·         The index of ruble bonds closed on Thursday near previous levels. The activity of players remains high.   Comments ·         SIBUR reported the sale of the terminal for transshipment of liquefied hydrocarbon gases in the port of Ust-Luga for 700 million Euros ($940 million), having received the funds, which the company had earlier planned to attract by using a 5-year unsecured loan of $1 billion. We expect a positive reaction to the news in the quotes of traded Eurobond SIBUR-18 (YTM – 5.91%, Z-spread – 476 b. p.). The potential for the yield reduction of the issue is 30-40 b. p. ·         New issues of Bashneft series BO-05 and Center-Invest series BO-10 are interesting for purchase. We expect the price increase and recommend buying in the secondary market. ·         Sberbank conducts negotiations on the purchase of Razgulay. We consider investments in the bonds of the company as investments with increased risk, however, we note that the entering of Sberbank in the capital of Razgulay will provide support to the quotations of the bonds.
May 22, 2014
UFS IC

FESCO, Bashneft. The Eurobond market rose again on Wednesday. The yield of RUSSIA-23 has already dropped by 100 b. p since May 5

Description
Global Markets and Macroeconomic News ·    Yesterday Gazprom and Chinese company CNPC signed an agreement on gas supplies to China for 30 years in the amount of 38 billion cubic meters per year. ·    Yesterday there were published the minutes of the FOMC meeting, which was held on April 29-30. ·    According to preliminary data from HSBC, the index of business activity of China in manufacturing rose at the end of May by 1.6 points to the level of 49.7 points. ·    According to preliminary data from Markit/JMMA, the index of business activity of Japan in manufacturing rose at the end of May by 0.5 points to the level of 49.9 points. ·    According to the U.S. Department of Energy, commercial stocks of oil have decreased by 7.23 million barrels by results of the past week.   Debt Market ·    The Russian Eurobond market strengthened on Wednesday amid the news on the long-awaited signing of the contract by Gazprom on gas supply to China. ·    The yield of issue RUSSIA-23 decreased on Wednesday by 8 b. p. to 4.60% per annum, and the yield of long Eurobond RUSSIA-43 decreased by 3 b. p. to 5.64% per annum. ·    We note that the yield of the benchmark issue RUSSIA-23 since May 5 has fallen by almost 100 b. p., which can stimulate the moderate correctional growth of the yield on the sovereign curve in the coming days. ·    On Thursday we expect a slight decline of the Eurobond market amid growing risks before scheduled for Sunday presidential elections in Ukraine. ·    The leading indexes in the secondary ruble bond market didn’t demonstrate single dynamics on Wednesday. ·    In May government securities demonstrated the best dynamics in comparison with corporate and municipal bonds. ·    Until May 25 we do not expect any strong movements in the market of ruble bonds.   Comments ·    The Board of Directors of FESCO approved at the end of April the group's development strategy until 2020, the final version of which will be presented to investors at the end of June, according to "Kommersant". According to forecasts of the company, its proceeds in 2014 will be $1.3 billion, EBITDA – $236 million, and by 2020 the Group plans to double these figures. The target debt level by 2020 is 1.8x Net debt/EBITDA, the forecast for the end of 2014 – 5.2x Net debt/EBITDA. Publication of the final version of the strategy at the end of June may become a significant driver for growth of the value of traded Eurobonds of the issuer FESHRU-18/16 (YTW – 15.6%) and FESHRU-20/17 (YTW – 14.3%), which are traded at 78% of the nominal. ·    Today Bashneft conducts the book building of bonds series BO-05 in the amount of 10 billion rubles with the offer in 4.5 years. Guidelines for the coupon and the yield are not announced. According to our estimates, the fair level of the yield is in the range of 9.8-10% per annum.  
May 21, 2014
UFS IC

Gunvor, NLMK. News on the strengthening of partnership between Russia and China supports the debt market

Description
Global Markets and Macroeconomic News ·         The visit of Russian President Vladimir Putin has become the most important event in the economic life of Russia and China.   Debt Market ·         Russian Eurobonds showed on Tuesday lateral movement in the absence of news on gas supplies to China. ·         A number of smaller contracts between Russian and Asian companies were yesterday a supporting factor. ·         The yield of issue RUSSIA-23 decreased on Tuesday by 3 b. p. to 4.68% per annum, and the yield of long Eurobond RUSSIA-43 grew 3 b. p. to 5.67% per annum. ·         On Wednesday we expect the lateral direction in the market. ·         The leading indices of the ruble bond market closed on Tuesday without single dynamics. ·         Issuers are trying to take advantage of the geopolitical calm and actively entering the primary market.   Comments ·         According to media reports, the owner of Gunvor is negotiating the sale of the company with several candidates, including Rosneft. If Gunvor is acquired by Rosneft or a company with a rating not lower than of Rosneft, the potential for the yield reduction of Eurobond GUNVOR-18 (YTM – 6.66%, Z-spread – 542 b. p.) may be around 180-200 b. p., which will lead to the increase of prices of Eurobonds to the level 103.6-104.3% of the nominal from the current level of 97.3% of the nominal. ·         NLMK published yesterday the statements under IFRS for the first quarter of 2014, which indicated the improvement of the efficiency of the Group's activities and reduction of the debt load. We expect that rather strong reporting and improved credit metrics of NLMK will support in the future quotations of bonds of the Group. Currently, ruble bonds of NLMK are priced fairly, and the potential of the accelerated yield reduction of Eurobonds NLMKRU-18 (YTM – 4.92%, Z-spread – 377 b. p.) and NLMKRU-19 (YTM – 5.44%, Z-spread – 379 b. p.) is 15-20 b. p. in the medium term.
May 20, 2014
UFS IC

Russian Eurobonds demonstrated the confident growth on Monday. Comments: EuroChem.

Description
Global Markets and Macroeconomic News ·         Today it starts the official visit of Russian President Vladimir Putin to China. ·         Investors of Asia continue to monitor the development of the conflict in the South China Sea between China and Vietnam. ·         The Central Bank of Australia has made it clear that it will keep the interest rates at the low level for some time.   Debt Market ·         The Russian Eurobond market showed on Monday a strong growth. The main driver was the news about the withdrawal of Russian troops from the border with Ukraine. ·         The yield of issue RUSSIA-23 decreased by 20 b. p. to 4.71% per annum, and the yield of long Eurobond RUSSIA-43 decreased by 18 b. p. to 5.64% per annum. ·         Sovereign Eurobonds can demonstrate on Tuesday a slight correction after yesterday's rise of quotations. ·         In general, we expect the increased interest of investors in Russian Eurobonds in the coming days against the background of signing a number of contracts with China. ·         Ruble bonds ended the day with a symbolic change of leading indexes. ·         The Ministry of Finance reduces the internal debt and gives up the external borrowing. ·         UniCredit Bank has ahead of schedule finished the canvass for the purchase of bonds.   Comments ·         EuroChem has reported for the first quarter of 2014 under IFRS, and also announced the acquisition of Astrakhan Oil and Gas Company. Own gas will allow EuroChem to reduce the cost of fertilizer production and to protect itself from the risks related to the increase of gas prices. The group revenue grew by 6% to 49.4 billion rubles, the EBITDA indicator increased by 15% to 14.2 billion rubles. At the same time, we note the increase of the leverage and the deterioration of the credit profile of the issuer. Traded Eurobonds of EuroChem EUCHEM-17 (YTM – 5.23%, Z-spread – 412 b. p.), as well as the issues of ruble bonds of the company at the current levels are priced by the market fairly.  
May 19, 2014
UFS IC

Gazprom Neft, UniCredit Bank. The debt market will start the week with neutral dynamics

 

Description
Global Markets and Macroeconomic News ·         Construction of new homes in the USA for April rose by 13.2% to 1072 thousand. ·         Industrial production in Japan, according to the final evaluation, rose in the first month of the spring by 0.7%. ·         Foreign direct investment in the Chinese economy grew by results of April by 3.4%, at the expectations of an increase by 1.0%. ·         On May 20-21, there will take place the official visit of Russian President Vladimir Putin to China.     Debt Market ·         Russian Eurobonds will start the week with neutral dynamics in expectation of the outcome of the visit of the President of Russia in China, as well as against the growth prospects of the risks before the elections in Ukraine on May 25. ·         On Friday sovereign Eurobonds decreased amid the tendency towards profit fixing after rising in the previous two weeks. The yield of issue RUSSIA-23 grew by 6 b. p. to 4.91% per annum. ·         In case of signing a long-term gas contract between Russia and China on Tuesday-Wednesday, it could have a material support to all Russian assets, including the Eurobond market. ·         Ruble bonds finished the day near the levels of Thursday. ·         UniCredit Bank starts the premarketing of bonds series BO-21.   Comments ·         Gazprom Neft submitted on Friday a report under IFRS for 1Q14. The net debt of the issuer decreased by 2.6 times to 86.4 billion rubles, while the ratio of Net debt/12M EBITDA as on March 31 amounted to 0.27x against 0.74x at the end of last year. The reduction of the debt load was determined by the increased volume of cash and cash equivalents, which may be a temporary phenomenon. However, the growth of revenue and EBITDA of the company allows speaking about the improving credit profile of the issuer. We expect a moderately positive reaction in the Eurobonds of Gazprom Neft. The potential of the accelerated reduction of the yield of issue SIBNEF-23 (YTM – 6.31%, Z-spread – 388 b. p.) is 20-25 b. p. ·         UniCredit Bank opens today the book of applications for the purchase of bonds series BO-21 in the amount of 10 billion rubles. The guidance of the coupon is announced in the range of 9.8-10.0% per annum, which corresponds to the yield to the offer in the range 10.04-10.25% per annum. The placement is scheduled on May 23, 2014. According to our estimates, the premium to the fair level for the placed bonds UniCredit Bank, BO-21 is 24-45 b. p.
May 16, 2014
UFS IC

The debt market will take a break on Friday after the growth of two weeks. Comments: Nordgold, Center-Invest Bank, Gazprombank

Description
Global Markets and Macroeconomic News ·         World markets will remain in doubt about the adequacy of forecasts of the strengthening of the world economy and the timing of the policy changes by the Fed. ·         USA: the increase of consumer prices in April accelerated from 1.5% yoy to 2.0% yoy (excluding food and energy – from 1.7% yoy to 1.8% yoy). ·         USA: the volume of industrial production in April fell by 0.6%, the forecast implied no changes (the figure for March was improved by 0.2%). ·         Eurozone: GDP for the first quarter +0.9% yoy, forecast: +1.1% yoy.   Debt Market ·         Russian Eurobonds will show on Friday neutral dynamics in connection with the tendency to profit taking after the strong growth before the weekend. ·         The yield of 10-year issue RUSSIA-23 showed on Thursday a modest growth, having increased by 1 b. p. to 4.85% per annum, and the yield of issue RUSSIA-43 decreased by 1 b. p. to 5.79% per annum. ·         In general, Russian Eurobonds demonstrated a substantial strengthening of quotations from the beginning of the past week, the price of issue RUSSIA-42 grew from the beginning of May by 9%, rising in the course of trading of Thursday to the peak from January 24 this year. ·         At the beginning of the next week, the Russian Eurobond market will probably also demonstrate neutral dynamics due to the uncertainty regarding the elections in Ukraine. ·         Ruble bonds ended the trading day with a moderate growth of indexes. ·         The issuers, which intend to carry out primary placement, start premarketing. ·         Today we expect local market to demonstrate moderately positive dynamics.     Comments ·         On Thursday, Nordgold presented results for 1Q14 under IFRS. We evaluate the statements as moderately positive, despite the increase of the net debt in connection with the company's progress in reduction of the production cost, which helped to significantly increase the EBITDA margin, and generate the positive free cash flow. However, due to the dependence of prices for gold from the events in Ukraine in recent months, the report is unlikely to become a significant driver for the Eurobond of the company NORDLI-18 (YTM – 7.74%, Z-spread – 652 b. p.). The potential for the yield reduction, therefore, is 10-15 b. p. in the medium term in the absence of a downward movement in the prices for gold. ·         Yesterday CB Center-Invest announced plans to open from May 21 to 22 the book of applications for the purchase of bonds in the amount of 2 billion rubles, which will be placed on May 26, 2014. The coupon guidance of a 5-year bonds series BO-08 is 11.75-12.00%, which corresponds to the yield of 12.10-12.36%. We consider the placement of the bonds interesting, as Center-Invest offers the premium of 180-186 b. p. to the fair level of the yield of 10.3%-10.5%, and recommend investors to take part in the placement. ·         Gazprombank today holds the canvass for the purchase of 3-year bonds series BO-08 in the amount of 10 billion rubles. According to our estimates, the premium makes up 40-50 b. p.
May 15, 2014
UFS IC

The debt market continues to move upwards. Comments: LUKOIL, MMK

Description
Global Markets and Macroeconomic News ·    Data on inflation and industrial production in the U.S. will predetermine the further dynamics of the world markets. ·    Chief economist of the ECB Praet confirmed that the managing Board may lower the deposit rate. ·    Japan: the GDP growth rate in the first quarter amounted to 5.9% in annual terms, which is higher than the estimates of economists at the level of 4.2%.   Debt Market ·    The Russian Eurobond market will continue on Thursday the upward movement on the background of the signs of the alleviation of the military conflict in the East of Ukraine. ·    On Wednesday, the yield of 10-year issue RUSSIA-23 decreased by 3 b. p. to 4.84% per annum, and the yield of issue RUSSIA-43 decreased by 2 b. p. to 5.80% per annum. ·    Among the news which could influence the movement of the market on Thursday, we note the publication of the data on inflation in the USA in April. ·    The local debt market showed no expressed dynamics yesterday. ·    The demand for placed yesterday Federal Loan Bond issue #26215 was oversubscribed by 2.3 times. ·    MegaFon has closed ahead of schedule the book of applications for 10-year bonds series BO-04.   Comments ·    Fitch Ratings confirmed on Wednesday the rating of LUKOIL at the level "BBB" with the negative outlook. The Agency explained that the rating outlook is limited by the "negative" outlook for the rating of the Russian Federation. The event is neutral from the point of view of the impact on the credit profile of the issuer, although Fitch’s comment on the possibility of increasing the rating above the sovereign may have a slightly positive impact on the Eurobonds of LUKOIL, which, in our opinion, are priced fairly. ·    Yesterday Fitch Ratings confirmed the credit rating of MMK at the level "BB+" with the negative outlook. The Agency expects the positive free cash flow of the company in the medium term, and reduction of the leverage to the acceptable level of 2.1x. We do not see any interesting ideas in ruble bonds of the company and offer investors to pay attention to paper MMC Norilsk Nickel series B-1, which are traded with unreasonably high premium to MMK, 18 and MMK, 19 in the amount of 50-70 b. p.
May 14, 2014
UFS IC

The debt market will continue to show upward dynamics on Wednesday. Comments: VimpelCom, Severstal, MegaFon

Description
Global Markets and Macroeconomic News ·    World markets will remain positive thanks to the expectations of easing of the monetary policy in China and in the Eurozone. ·    Wall Street Journal: the Bundesbank is ready to support the easing of the monetary policy by the ECB. ·    USA: retail sales in April +0.1% at expectations of +0.5%; the index for March was revised from +1.1% to +1.5%.   Debt Market ·    The Russian Eurobond market is likely to continue on Wednesday the upward movement. ·    The yield of 10-year issue RUSSIA-23 decreased on Tuesday by 12 b. p. to 4.86% per annum, and the yield of long issue RUSSIA-43 decreased by 6 b. p. to 5.82%. ·    The Ministry of Finance adjusted the borrowing program for this year –entering foreign markets is not planned. ·    The local debt market finished yesterday the day with negative dynamics. ·    The Ministry of Finance will conduct today an auction on placement of Federal Loan Bond-26215 in the amount of 10 billion rubles. Successful placement of the issue will signal the return of the interest of investors in the securities of the market.   Comments ·    On Wednesday VimpelCom, simultaneously with the publication of the statements for 1Q14, revised the forecast for 2014 downwards. In 1Q14 the company's revenues decreased 5% to $5 billion, and EBITDA decreased by 6% to $2.1 billion. By results of the year it is expected a decline in revenue and EBITDA by 3-4%. The ratio of Net debt/EBITDA increased to 2.4x from 2.3x, at the end of 2014 it is expected 2.4x. We evaluate the data for 1Q14 and updated forecasts for the year as negative from the viewpoint of the credit profile of the Issuer and do not expect dynamics above the market of traded Eurobonds of the company. ·    Fitch Ratings raised the rating of Severstal by 1 notch to "BB+" from "BB" with a stable outlook. We evaluate this news as positive from the viewpoint of the influence on quotations of Eurobonds of Severstal. Another supporting factor is the prospect of the sale of assets in the United States. Among Eurobonds of the issuer we note issue CHMFRU-18 (YTM – 5.30%, Z-spread – 404 b. p.), the potential for the yield reduction of which is 25-30 b. p. the price growth by 1%. ·    MegaFon yesterday started the book building for the purchase of bonds in the amount of 15 billion rubles, the company offers the premium of 55-75 b. p. to the fair level. We recommend you to take part in the placement, taking into consideration the fair yield to put option in the range of 9.4-9.5%.
May 13, 2014
UFS IC

On Tuesday the debt market will continue the lateral movement. Comments: Russian Agricultural Bank, RUSAL

Description
Global Markets and Macroeconomic News ·         World markets will remain positive after the data from the PRC below expectations. ·         China: the volume of industrial production +8,7%, retail sales +11.9%, investments in fixed capital – +17.3%; prev. +8.8%; +12.2% and +17.6%, respectively. ·         The press service of the President of the Russian Federation: Russia hopes that the practical realization of referenda in the Donetsk and Lugansk regions will not lead to the escalation of tensions.   Debt Market ·         The Russian Eurobond market will continue its lateral movement on Tuesday. ·         The yield of issues RUSSIA-43 and RUSSIA-23 almost didn’t change on Monday. ·         A reserved position of the Russian Federation to the results of the referendum holds the market from a decrease after a rally last week. ·         In the local debt market trading was held in conditions of a peaceful news background and without single dynamics of indices: government and municipal bonds in the corporate segment demonstrated growth.   Comments ·         Russian Agricultural Bank plans in the framework of the secondary placement in the period from 19 to 23 may 2014 the book building for bonds of series 08 and 09, which were placed on November 26, 2009 in the amount of 5 billion rubles each. Taking into account the indicative yield to put option in a year at the rate of 10.25% per annum, we consider the participation in the secondary placement sensible, as we expect the decrease of the yield of bonds to the levels of issues of Russian Agricultural Bank, 13 and Russian Agricultural Bank, 14, which at the moment are in the range of 9.5 and 9.6%. ·         Yesterday RUSAL reported for the first quarter of 2014, showing an improvement of the financial state compared to 4Q13 and a significant slowdown in the growth rates of production, revenue and profitability compared to the same period last year. Improvement of the financial condition of RUSAL and positive changes in the aluminium market will find a positive reflection in the quotations of traded bonds of the company RUSAL Bratsk, 07 and RUSAL Bratsk, 08. However, we note that investments in securities of the company are investments with higher risk.
May 12, 2014
UFS IC

On Monday the Debt market will evaluate the consequences of the referendum in the East of Ukraine. Comments: Severstal, Magnit

Description
Global Markets and Macroeconomic News ·    World markets will be dependent on the current drivers and the development of the situation in Ukraine. ·    The EU, the USA and Ukraine have already called the referendum in the East of Ukraine "illegal" and "illegitimate". ·    The President of China, XI Jinping: the government is ready to take measures to support the economy. ·    Head of the ECB Draghi: the ECB ready to take measures towards mitigation of the policy at the next meeting.   Debt Market ·    The Russian Eurobond market will show on Monday lateral dynamics with the possibility of a decrease. ·    Investors will weigh variants of the development of events after the referendum in the East of Ukraine. ·    The movement of the market will depend on the comments of politicians of the EU and the US regarding the voting. ·    The market of ruble bonds finished Thursday with a weak growth. ·    Long issues of sovereign bonds are in demand for the second consecutive day. The corporate debt segment demonstrates weaker dynamics. ·    The situation in the market will depend on the rhetoric of Europe and the U.S. towards the referendum held in Ukraine.   Comments ·    Severstal has offered for sale two plants in the USA, says the article in the WSJ published on Saturday at night. The possible value of the deal is $1.5 billion. The sale of assets will have a significant positive impact on the credit profile of the Issuer, as it will drastically reduce the debt from 1.64x Net debt/EBITDA to below 1.0x Net debt/EBITDA. In this regard, we expect a positive reaction to the entire Eurobond curve of the Issuer. The most active reaction can come to manifestation in long issues CHMFRU-18 (YTM – 5.33%, Z-spread – 405 B. p.) and CHMFRU-22 (YTM – 6.76%, Z-spread – 437 b. p.). ·    The S&P revised the outlook for the ratings of Magnit from "stable" to "positive". On Thursday Magnit has also published unaudited results for April and for 4 months of 2014, traditionally demonstrating high rates of growth of the basic indicators.
Cbonds EM

Cbonds EM Monthly Newsletter, April 2014

Description
This report gives a comprehensive view of issuance activity in Emerging Market Eurobonds as well as league tables for investment banks. The report gives data on global EM and selected regions: Asia, LatAM, CEE, CIS, Middle East and Africa. 
May 08, 2014
Cbonds Research

CBONDS EM MONTHLY NEWSLETTER: ISSUES STATISTICS AND LEAGUE TABLES (APR 2014)

Description
Cbonds starts publishing new monthly report: CBONDS EM MONTHLY NEWSLETTER: ISSUES STATISTICS AND LEAGUE TABLES. This report gives a comprehensive view of issuance activity in Emerging Market Eurobonds as well as league tables for investment banks. The report gives data on global EM and selected regions: Asia, LatAM, CEE, CIS, Middle East and Africa.   League tables are built using League table builder at Cbonds (http://em.cbonds.com/rankings/generator/, free access, registration required). EM monthly issuance statistics is available at http://em.cbonds.com/indexes/ (free access).   This issue (Apr 2014) highlights:   * Historical highest volume of new EM Eurobonds in Apr 2014 - 116 issues with the volume USD 70.63 bn. This is the highest monthly volume since Cbonds started to follow this statistics in Jan 2010. Previous high was in Jan 2014 (USD 67.13 bln, 106 issues). The number of new issues is also at historically highest level (116 issues, the same as in Jan and Apr 2013). However due to relatively quiet 1Q 2014, the overall issuance in Jan-Apr is just 3.2% higher than in Jan-Apr 2013 (USD 197 bln VS USD 190.9 bln). * Asia is remaining the main driver for unprecedented EM activity. The volume of new bonds from Asia in April amounted to USD 38.3 bln (71 issues). For Jan-Apr 2014 Asian borrowers printed bonds for USD 87 bln., app. 33% increase from 2013. * LatAM borrowers issued 24 bonds in Apr with total volume USD 15.85 bln. Overall issuance in this region in Jan-Apr reached USD 55.9 bln, a 30% increase from 2013. * Activity in CEE remains relatively high. CEE issuers in April printed 7 bonds worth USD 6.373 bln, more or less in line with activity in recent months. However, due to very high activity in Jan 2014, overall issuance from CEE in Jan-Apr amounted to USD 30 bln, 33% increase to Jan-Apr 2013. * Growing activity in Middle East (8 issues in April worth USD 6.55 bln) and Africa (4 issues worth 3.35 bln). * Very low activity from Russia & CIS (just 2 issues worth USD 170 mln) due to geopolitical crisis in Ukraine. Unfortunately there is no reasons to expect it will be over soon. * Citi and HSBC tops the league table for global EM in Jan-Apr with very similar volumes (USD 20.27 bln and USD 20.12 bln respectively). They are followed by JP Morgan (17.1 bln), Deutsche Bank (14.85 bln) and BofA Merrill Lynch (11 bln). Goldman Sachs, Barclays, BNP Paribas, UBS and Credit Suisse are also in Top-10. * HSBC is leader in Asia with Citi ranked 2nd and Deutsche 3rd. Also in Top-10 are BofA ML, Standard, UBS, JP Morgan, Goldman, Bank of China and Morgan Stanley. Bank of China regained its place in Top-10 after being 11th in 1Q 2013. * HSBC is also leader in LatAM (6.17 bn) followed by JP Morgan and Credit Suisse. Deutsche, BofA ML, Citigroup, Banco do Brasil, Goldman, Banco Bradesco and BNP Paribas are also in Top-10. * CEE remains a stronghold of Citi where it enjoys comfortably edge over JP Morgan (USD 5.2 over USD 3.8 bn). BNP is 3rd in CEE, followed by Barclays, Deutsche Bank and Goldman Sachs. HSBC, Citi main rival, is only 7th (USD 1.96 bn). Societe Generale, Unicredit and ING complete the Top-10. 
UFS IC

The Eurobond market jumped on Wednesday and can continue growth due to the reduction of tension in regard to Ukraine. Comments: Metalloinvest

Description
Global Markets and Macroeconomic News ·    World markets will regain optimism thanks to the data on foreign trade of China and the emergence of prerequisites for the settlement of the crisis in Ukraine. ·    The OSCE is ready to coordinate the plan of actions on normalization of the situation in the Eastern regions of Ukraine. ·    China: the export and import from China was higher than the values of the previous year by 0.9% and 0.8%, respectively (forecast: -3.0% and -2.0%). ·    The Fed's Yellen gave an optimistic assessment of the economy and stressed the problems in the real estate market and the high level of long-term unemployment.   Debt Market ·    The Russian Eurobond market jumped on Wednesday after the press conference of Russian President Vladimir Putin and Head of the OSCE Didier Burkhalter. ·    The yield of issue RUSSIA-23 fell on Wednesday by 38 b. p. to 5.10% per annum, and issue RUSSIA-43 decreased by 37 b. p. to 5.94% per annum. ·    In the course of trading on Thursday we expect positive dynamics in the market in the absence of further fighting in the East of Ukraine. ·    In case of any progress in the development of the "road map" of the OSCE on Ukraine, strengthening of the market of Eurobonds may continue at the beginning of the next week. ·    In expectation of a long weekend the local market will experience the high chance of correction. ·    Yesterday long sovereign bonds were in demand. In the corporate segment outsiders of the day were bonds RUSSLAVBANK, 01.   Comments ·    Fitch Ratings raised on Wednesday the rating of Metalloinvest by 1 notch to "BB" with a stable outlook. We evaluate this news as positive from the point of view of the influence on quotations of traded Eurobonds of Metalloinvest METINR-16 (YTM – 5.55%, Z-spread – 495 b. p.) and METINR-20 (YTM – 7.50%, Z-spread – 556 b. p.). We expect a decline in the yield of long Eurobond METINR-20 by 25-35 b.p. at the growth of the price by 1.5%. Additional support will be the fact that during the trading on Wednesday the issue showed the increase significantly weaker compared with the market: the yield of METINR-20 declined by 18 b. p., whereas the yield of the benchmark sovereign issue RUSSIA-23– by 38 b.p.
May 07, 2014
UFS IC

Russian Eurobonds rose strongly on Tuesday against a temporary "lull" in the East of Ukraine. Comments: Lenta

Description
Global Markets and Macroeconomic News ·    World markets cannot ignore a new outbreak of tension in Ukraine. ·    USA: the foreign trade deficit decreased in March from $41.9 billion to $40.4 billion; forecast – $40 billion ·    China: the composite index of business activity from HSBC rose in April from 49.3 to 49.5 p. p. ·    Russia: the consumer price index increased in April to 7.3% yoy; prev. 6.9% yoy.   Debt Market ·    The Russian Eurobond market grew substantially on Tuesday amid a lull in the conflict in the East of Ukraine. ·    The yield of issue RUSSIA-23 dropped on Tuesday by 12 b. p. to 5.47%, and the yield of RUSSIA-43 – decreased by 13 b. p. to 6.30% per annum. ·    During the trading on Wednesday we expect positive dynamics in the market in the absence of new armed confrontations in Ukraine. ·    The indices of the state, municipal and corporate sectors finished the day with a symbolic decline in the range of 0.01 to 0.04%. ·    In the primary market of corporate sector the planned placements were conducted successfully.   Comments ·    Lenta attracted a credit line of Sberbank with the limit of 10 billion rubles and is preparing the next issue of bonds. New borrowings diversify the financing sources, however, have a negative impact on the credit metrics. Among papers of the consumer sector we see the growth potential in the bonds O’KEY, 02.  
May 06, 2014
UFS IC

The debt market will show neutral dynamics on Tuesday. Comments: Aeroflot, Norilsk Nickel.

Description
Global Markets and Macroeconomic News ·         World markets will continue to move at a small pace without demonstrating single dynamics against the persistence of tension in Ukraine. ·         USA: the index of business activity in the services sector in April 55.2 p.; prev. 53.1 p. ·         The CBR reported an increase by 5 kopecks of the corridor of the bi-currency basket to 36.4-43.4 rubles.   Debt Market ·         On Tuesday Russian Eurobonds will show neutral dynamics in case of the absence of a sudden resumption of hostilities in Ukraine. ·         On Monday the activity of the Eurobond market was below average due to a national holiday in the UK, and the yield of issues RUSSIA-23 and RUSSIA-43, according to the trading results, has shown a symbolic increase by 1 b. p. ·         Among interesting events we note the intention of Russian Agricultural Bank to hold by the example of Gazprom a non-deal roadshow in Asia without the indication of concrete terms of meetings with investors. ·         The aggravation of the Russian-Ukrainian conflict was reflected by the ruble bond market with a weak decrease of leading indexes. ·         Today, in case of the neutral news background, the market of ruble-denominated debt may demonstrate a weak rebound.   Comments ·         Aeroflot has published operational results for the first quarter of 2014 and demonstrated high growth rates of the main indices. The passenger traffic of the company grew by 15.2% against the average growth rate of 10.3%. We consider undervalued the bonds Aeroflot, BO-03 and expect the return of the yields in the range of 7.8 to 8.0%. ·         The Board of Directors of Norilsk Nickel approved on Monday the attraction of $200 million for the period of 5 years within the loan of the Russian subsidiary of ING financial group. Previously, in early April, Norilsk Nickel announced the signing of two urgent unsecured loans from UniCredit Bank of $400 million and from Raiffeisenbank in the amount of $350 million, which given the volume of cash and equivalents of $1.6 billion, excludes the short-term liquidity risks of the issuer. In this regard, the news on attraction of $200 million from ING can be considered as a positive for the credit profile of the issuer, but the substantial growth of the traded Eurobonds is not expected.  
Bank ZENIT

Ежедневный обзор долговых рынков

May 05, 2014
UFS IC

The debt market will start the week with lateral dynamics. Comments: ALROSA, Russian Railways.

Description
Global Markets and Macroeconomic News ·         The dynamics of the global markets will develop with an eye on the situation in Ukraine. ·         The Federal Open Market Committee, as expected, has reduced the volume of the QE3 program by $10 billion to $45 billion. ·         USA: In April the unemployment rate fell from 6.7% to 6.3%; it was created 288 thousand new jobs; forecast: 6.6% and 218 thousand, respectively. ·         Russia: the index of business activity in the services sector in Russia from HSBC in April rose from 48.3 to 48.5 p. p. (the forecast was 48.0 p.).   Debt Market ·         Russian Eurobonds will show on Monday lateral dynamics due to the position of "non-interference" of the Russian authorities in the conflict in the East of Ukraine. ·         On Thursday-Friday of the past week the Eurobond market showed a moderate decrease, reflecting the news on the beginning of military operation in the Donetsk region. ·         Friday's data on unemployment in the USA have led to the decrease of the yield of UST-10 to the minimum of six months. ·         The Russian debt market demonstrated on Friday weakly positive dynamics. ·         Trading was held with a low trading activity. ·         The market of government and corporate debts didn’t indicate significant changes.   Comments ·         ALROSA managed to refinance the short-term debt. The risks of a downgrade have decreased. As a protective instrument we recommend to consider the most liquid issue ALROSA, 23 (YTM – 9.25%) maturing in June 2015, which is currently traded with a spread to the securities of Norilsk Nickel and Metalloinvest. We estimate the fair yield at 8.8-9.0%, which implies the yield reduction by 25-45 b. p. ·         JSC Russian Railways submitted on April 30 the statements for 2013 under IFRS. The statements of state-owned company look moderately negative against the growth of the ratio Net debt/EBITDA by almost 2 times to 1.74x against 0.93x at the end of 2012 and a decrease of EBITDA margin. Among Eurobonds of Russian Railways we note issue RURAIL-31 (YTM - 7,14%, Z-spread – 420 b. p.).  
April 30, 2014
UFS IC

We expect neutral dynamics of the market on the eve of May holidays. Comments: O’KEY

Description
Global Markets and Macroeconomic News ·    The IMF has lowered the forecast of economic growth of 22 European countries cumulatively from 2.7% to 1.9%. ·    According to preliminary data, the consumer price index amounted to -0.2% m/m in April. ·    In the first quarter of 2014 the Bank of Russia spent more than $40 billion to support the ruble.   Debt Market ·    The domestic debt market has responded positively to the reduction of tension in the Russian-Ukrainian conflict. ·    The sector of sovereign bonds rose for the first time during the last four sessions. ·    We expect the neutral opening of markets with preservation of weakly negative dynamics of indices in the course of the day.   Comments ·    O'KEY demonstrated poor results for the first quarter of 2014 under IFRS, showing the loss by results of the reporting period. The Group's management explains the net loss by the write-off revaluation of loans and tax deductions connected with the payment of dividends in February 2014. We see an interesting idea in the ruble-denominated issue O’KEY, 02 with the put option in December 2015, which is traded with unreasonably large spread to securities of Magnit and X5. The potential yield decline is 65-75 b. p.
April 29, 2014
UFS IC

The Eurobond market will grow on Tuesday due to unexpectedly soft sanctions from the USA. Comments: Banglalink Digital Communications

Description
Global Markets and Macroeconomic News ·    World markets will sigh with relief thanks to the mild nature of imposed sanctions against Russia and the end of military exercise of the armed forces of the Russian Federation near the borders of Ukraine. ·    USA: the index of signed contracts for home sales in March increased by 3.4%; forecast: +1.0% ·    Money market rates moved to new highs, reacting to the tightening of the monetary policy by the Bank of Russia.   Debt Market ·    Russian Eurobonds on Tuesday will continue the strengthening, which began on Monday evening. ·    Unexpectedly mild sanctions against Russia and messages on the return of Russian armed forces to the places of the permanent deployment speak in favor of the market growth. ·    Among important market events we also stress the beginning of a two-day meeting of the Fed, at which there is expected the reduction of QE3 program by another $10 billion.   Comments ·    Banglalink Digital Communications, a subsidiary of VimpelCom in Bangladesh, placed yesterday the country's first 5-year issue of Eurobonds in the amount of $300 million with a coupon of 8.625% per annum. Issue BBLINK-19 attracted quite a high interest of investors in Asia and Europe, and by the morning of Tuesday, the yield of the Eurobond amounted to 8.55% per annum, the price – 100.29% of the nominal. Given the fact that the issue of VimpelCom VIP-19 is traded at the yield of about 6.8% per annum, the yield of Eurobond BBLINK-19 looks pretty interesting at above 8.5%. We expect further upward dynamics of issue BBLINK-19.  
April 28, 2014
UFS IC

The geopolitical situation will continue to determine the sentiment of investors. Comments: meeting of the Bank of Russia, Alliance Group. 

Description
Global Markets and Macroeconomic News ·    Geopolitical tensions and high appraisal of risk assets will continue to form the sentiments in world markets after the weekend too. ·    The USA is ready to extend sanctions against defense and technological sectors of the Russian economy, and the European Union – to extend the sanctions list for another 15 citizens. ·    The Board of Directors of the Bank of Russia has decided to raise the key rate by 50 b. p. to 7.5%. ·    The Bank of Russia will introduce a new instrument of refinancing investment projects for the term up to three years at 6.5% per annum.   Debt Market ·    Growing tensions in the East of Ukraine and the downgrade of the rating of Russia have entailed the increase of the yield of sovereign Eurobonds of the Russian Federation by 28 b. p. on Thursday-Friday. ·    On Monday the Eurobond market will try to slow the pace of decline accumulated last week, although the dynamics of quotations will be under pressure due to concerns about the imposition of new sanctions.   Comments ·    According to media reports, Alliance Group and JSC Independent Oil and Gas Company signed an agreement on creation of the joint venture, in which Alliance will contribute assets of Alliance Oil, and Independent Oil and Gas Company – the assets in the Saratov region and Taimyr. The future JV has good prospects to become a more prominent player in the Russian oil and gas industry than Alliance Oil alone, and in this regard long Eurobond VOSTOK-20 (YTM – 10.62%, Z-spread – 864 b. p.) can attract the interest of investors in the medium term.  
ROSBANK

Eco Analysis - Russia: CBR decides on a sudden 50-basis-point rate hike

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