Ruble bonds: The upside is limited

RUSSIA ECONOMICS - Report 17 Jan 2020 by Evgeny Gavrilenkov and Alexander Kudrin

The Russian market rallied at the beginning of the year. As a result, OFZ yields in the long end of the curve dropped almost to the level of the CBR key rate. Coupled with the strengthening of the ruble observed in December–January, it makes ruble sovereigns less attractive for international investors. Domestic demand is still in place, but it is not enough to allow the Finance Ministry to fulfill its ambitious issuance program. We suppose that in this situation the OFZ market dynamics will be largely defined by behavior of the borrower on the primary market and expect pressure over the yield curve in the near future. ​

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