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Norvik Research 23.02.2017

23/02/2017 18:30

Global developments

Yields on government securities fell further as investors downplayed risk of an imminent Fed hike. Minutes of the latest FOMC meeting showed no real urgency among Fed officials to tighten policy, causing 10-year US Treasury yields to fall from 2.45% to 2.41% at the close of yesterday and further to 2.38% today. Yields on 2-year Bunds tested new lows of -0.92%. 10-year Bund yields fell 3 bps to 0.25%, French 10-year OAT yields fell 5bps to 0.97%. S&P 500 futures are marginally higher, EuroStoxx 600 is up 0.1%, Asian stock markets are lower. The dollar index is down 0.3%.

Oil prices are up today on an indication of the first decline in US crude stocks this year. An API report point to a 0.88mn bbl decline in the previous week, compared to market consensus for a 3.5mn bbl increase in the official data (due this afternoon). Oil prices (Brent) are 1.5% higher at $57.0/bbl.

Corporate news

Russian Railways (RZD) yesterday issued a 7-year $500mn Eurobond amid strong demand from non-resident investors. The total order book was $1.75bn, helping to push the yield guidance from 4.625% initially to 4.25-4.50%. In the end, the coupon was set at 4,375% implying only a 70 bps premium over the sovereign curve and virtually no premium to its own existing issues. Nearly 70% of the issue was bought by foreign investors.

Russia and CIS area developments and market colour

Ukraine’s central bank governor Gontareva has warned that the continuing blockade of coal shipments from Eastern regions may lead to balance of payments losses of up to $2bn. She stressed that in the event of disruptions to steel output and the need to import coal the authorities will impose “anti-crisis measures”. The blockade of the railway freight by supporters of nationalist politicians, in place since 25 January, has prompted the government to declare a state of emergency in the energy sector.

Russia’s inflation returned to 0.1% in the week to 20 February, from zero in the previous week. On the year-on-year basis, headline inflation is estimated to have declined to 4.7% YoY, from 4.8% earlier.

Today and tomorrow are market holidays in Russia.

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