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Norvik Research 14.09.2016

14/09/2016 15:40

Global developments

European stock markets are firmer today after the weakest period in two months. Euro Stoxx 600 is up 0.4%. Earlier today MSCI Asia Pacific index fell 0.7% contracting for the fifth day in a row and losing about 4% since last Wednesday. S&P closed 1.5% lower yesterday while this morning, S&P futures are 0.2 higher. The dollar index increased 0.5% yesterday and is marginally weaker today. The US 10y yields jumped 6 bps to 1.72% yesterday and are flat today. The Bloomberg commodity index is 0.3% higher.

Oil prices recouped some of the recent losses after yesterday's US inventories data. API reported that crude oil inventories in US in the previous week were up 1.1 mn bbl (against consensus forecast of +4 mn bbl related to a shut-in of oil following a Gulf of Mexico hurricane), while gasoline stocks contracted 2.4 mn bbl. Brent prices added 0.1% today to $47.1/bbl.

Russia and CIS area developments and market colour

Ukraine expects to receive $2.3 bn from the IMF until the end of the year. The IMF Board will vote on the first $1 bn today, the funds are expected to be disbursed within a couple of days according to deputy chairman of the central bank Churiy. Another $1.3 bn tranche may come by the end of the year in case of further successful implementation of the IMF program. We view the official outlook as relatively optimistic given the recent track record of the government. However, the authorities would have an incentive to increase the pace of reforms in order to qualify for additional IFI funding.

The rouble strengthened 0.3% today at 65.1 against the dollar. OFZ yields tightened 2-7 bp yesterday and 1-4 bp tighter today. Russia and Kazakhstan longer-term bonds are 2 and 6-8 bp wider today. Ukraine sovereign yields are 3-6 bp wider. Azerbaijan 24 and Armenia 25 are flat, while Belarus-18 is 3 bp wider.

VTB will issue 1-day bonds for RUB 5tn. These bonds will be an alternative to CBR’s deposit auctions to absorb liquidity. The issuance with a limit of RUB 5tn for 2-3 quarters will start in October. The issuance will be made daily by 16:45 Moscow time with settlement effected at 12:00 the next day. The target yield will be between a CBR’s deposit rate and an interbank overnight rate.

Corporate news

Global Ports may issue a Eurobond. The Russian container terminal operator Global Ports has started preparations to issue a new 7-year Eurobond and has appointed six banks to arrange the deal. We note the relatively weak H1 2016 financial results which were a driver of the latest downgrade to BB- by Fitch.

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