Norvik Research 19.12.2016

19/12/2016 19:33

Global developments

The start of the final full working week of the year is marked by caution amid declining trading volumes. S&P 500 is 0.4% stronger after the index lost 0.2% on Friday. Euro Stoxx 600 is 0.2% lower, Nikkei 225 is down 0.1% while CSI 300 is losing 0.5% today. The US dollar index is 0.1% higher. EURUSD is 0.3% lower at 1.0425 today, after touching 1.037 last week, the minimum since January 2003. 10-year US Treasury yields are down 4 bps today at 2.56%. Gold prices are 0.4% higher after rising 0.5% on Friday, the first back-to-back increase in a while. The Swiss frank is 0.2% stronger against the euro.

Oil prices are lower on increased drilling activity. Baker Hughes reported that rotary rigs count in the US increased by 12 to 510 in the previous week. Brent price are 0.6% lower today at $54.9/bbl.

Russia and CIS area developments and market colour

Ukraine has decided to nationalize Privatbank, the country’s largest lender. Following a special meeting last night, the government announced today that it assumed 100% of Privatbank’s equity after shareholders requested government’s help. The bank’s capital shortage has been estimated by the central bank at UAH 148bn ($5.6bn) as of 1 December 2016. Recapitalization of the bank will be done via issuance of domestic debt for UAH 43bn. Speaking on a conference call earlier today, senior officials referred to a planned bail-in of holders of Privatbank’s Eurobonds. Resolution of Privatbank’s large-scale related lending problem has been a key requirement of Ukraine’s international lenders. The hryvnia is marginally lower today at 26.3 against the dollar.

The rouble is 0.2% stronger today at 61.9 against the dollar. OFZ yields dynamics is mixed today. Russia and Kazakhstan longer-term sovereign Eurobond yields are 1-2 bps lower. Azerbaijan-24 and Belarus-18 are 7 and 8 bps higher respectively. Ukraine sovereign bonds are 12-17 bps lower while Ukraine-19 yield is 56 bps lower at 7.79%.

Corporate news

The CBR included Rosneft’s recent bond issue into the Lombard list. The 001P series issue for RUB 600bn was privately placed on 7 December. The eligibility of this security for REPO operations with the CBR opens a significant new liquidity window for the local banking system. Finance Minister Siluanov indicated earlier that Rosneft privatization receipts have come from “other sources” rather than conversions of FDI flows.

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