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Norvik Research 27.02.2017

27/02/2017 18:12

Global developments

President Trump’s address to Congress tomorrow night remains this week’s most important policy development (and event risk). It is unclear at this stage whether the expected announcement of tax reform plans will include a border adjustment tax. 10-year US Treasury yields are marginally higher today at 2.33%. In Europe the focus is still on support for candidates in the French presidential elections. Prices for French bonds continue to recover as Macron widened his lead over Fillon and narrowed the gap with Le Pen. The most recent polls give Macron 24-25% of the vote, versus 20-21% to Fillon and 26-27% to Le Pen. French 10-year yields tightened 1 bp to 0.91% after falling 5 bps on Friday. 10-year German Bunds yields are up 1 bp today at 0.20%, against 0.30% a week ago. The dollar index is 0.3% weaker today. The pound fell a newspaper report about the Scottish government’s potential call for a repeat independence referendum as early as next month.

Global stocks are lower today after the previous week’s rally. S&P futures are marginally lower after rising 0.7% in the previous week to a fresh high. EuroStoxx 600 is down 0.3% today. CSI 300 is down 0.8%, Nikkei 225 is 0.9% lower. Iron ore prices are 2% higher today.

Oil prices are rising as OPEC members seek to raise compliance further. The UAE are reportedly working to ensure full compliance with the OPEC’s output agreement. The US active rotary rigs count rose by 5 to 602 in the previous week. Oil prices are 0.7% higher (Brent) at $56.4/bbl.

Russia and CIS area developments and market colour

Russia’s Ministry of Finance plans to issue OFZs for households in April. According to Minister Siluanov, MinFin is going to issue 3-year off-market OFZs every 6 months with a 50 bps premium to market yields. The annual amount of issuance is expected to be about RUB 20-30bn.

The rouble is 0.6% stronger today at 58.0 versus USD, tracking oil prices. OFZ yields are unchanged today. Russia’s and Kazakhstan’s longer term sovereign Eurobonds are 1 and 2-4 bps tighter on the day. RZD opened books for 7-year euroclearable RUB-denominated notes with coupon guidance of 9.00-9.15%.

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