"УНИВЕР Капитал": Eurobonds Market Outlook

World Market

On Friday last week oil prices raised above $40 a barrel of Brent in anticipation of an OPEC and non-OPEC members meeting later this month to discuss the stabilization measures for oil market. Russia is going to take part in the meeting, but Russian Deputy Prime Minister Arkady Dvorkovich on Friday last week said that the likelihood of a coordinated cut to oil production isn’t high. Additionally, over the weekend, Iran’s oil minister said that Iran wouldn’t join a production freeze until its own output rose to 4 million barrels a day. Other OPEC members recently have said that they would be reluctant to agree to a production cut without agreement of all major oil producers.

Another factor that has driven the oil prices up is falling oil output in the U.S. But while the oil prices stage a sustained recovery, U.S. shale-oil producers are ready to increase production within a few weeks’ timeframe. Rising oil prices may bring oil producers back in play. Thus, the current price recovery doesn’t necessarily mean a long-term trend.

The U.S. market looks unstable as investors stay cautious ahead of the Fed’s two-day meeting starting Tuesday. However, investors this week refrained from making any big moves before the Fed’s rate decision on Wednesday. The turmoil in financial markets at the beginning of the year may make the Fed to postpone the next rate increase.

In Europe, the markets continue to move upward reacting to the  easing measures from the European Central Bank announced on Thursday last week. Those stimulus may help boost the economy and raise inflation in the euro area which slid below zero in February.

China’s attempts to boost its economy are helping keep the oil prices up since China is the world's largest oil importer. Chinese investors hope for further stimulus that may be announced during the National People’s Congress in Beijing that wraps up on Wednesday.

Russian Market

The Russian ruble appreciated against major currencies last week as oil prices grew and reached its highest level since the mid December last year. Official ruble exchange rates against the U.S. dollar and euro strengthened to less than 70 and 77 units respectively by the end of the last week. Russian sovereign CDS 5Y fell below 300 points.

Russian sovereign Eurobonds’ curve during last week moved downward slightly by 3-5 bps along the curve with the exception of  Russia-18. Banking sector gained the most last week – NMOSRU-18 and VEBBNK-23 added 1.38% and 0.93% pricewise respectively, and GPBRU-18 denominated in EUR gained 0.9% in price. The Eurobonds’ prices of the oil and gas sector didn’t change much over the last week despite the oil price move.

This week features a series of central bank meetings and announcements starting with the BoJ on Tuesday, the FOMC on Wednesday and the BoE on Thursday. The Bank of Russia is likely to keep policy rates intact during the meeting on 18^th of March given the inflation expectations are still high. Due to that and the recent price development we recommend investors this week to stay off the Eurobonds’ market.