Since the beginning of the month prices of sovereign issues Russia-2042″ and “Russia-2043 rose by 4 percentage points: both securities are currently traded with a yield lowest since may 2013 — 4,6–4,65% annual. Bonds “Russia-2026”, which the Ministry of Finance placed in may 2016, showed an absolute record, having risen in price up to 106,6%. Their yield since the host fell 0.81 percentage points to 3.94% per annum.
In the segment of corporate Eurobonds last week also observed the rally. As the analyst of Sberbank CIB Alexander Golynsky, increased demand from investors enjoyed a long Eurobond issues of banks and oil and gas sector. The Gazprom Eurobonds with maturity in 2034 increased in price by 6 percentage points and is now trading with a yield of 5.83% per annum, papers VTB maturing in 2022 climbed 2 p. p., their yield fell to 5.68% per annum. Corporate Eurobonds maturing in 2020-2024 years in the middle of August rose by 2 p. p.
“After July’s rebound, triggered by the decline in oil prices, the bond market returns to previous highs. The growth of prices for Russian Eurobonds continues in the spring of 2016, and there is no reason to stop,” says managing research and analysis debt markets PSB Alexander Polyutov. According to him, the correction in the debt market could begin in the case of significant collapse of oil prices and if the fed decides to raise rates before the end of the year. However, according to experts, while investors are waiting for action from the financial authorities of the USA and is ready to increase the risks by investing in securities of emerging markets.
This is reflected in the foreign exchange market, where the rise of most currencies against the dollar. As writes Agency Bloomberg, the index of the currencies of developing countries MSCI EM Currency rose to its highest in 13 months and for the first time in four years to show growth for the year. “For developing countries it is a Golden time, and at the moment it looks like she will continue. The history of the search for assets with high profitability still needs to attract investors to emerging markets, while developed countries seem to continue to move towards increasingly lower rates,” commented Bloomberg chief currency strategist at Bank of New York Mellon in London, Simon derrick.
“The activity of non-residents heated stimulating measures that take the Western Central Banks,” explains Polutov. In early August, the Bank of England for the first time in seven years reduced its discount rate from 0.5% to 0.25% and expanded its bond-buying program. According to Polutov, investors expect similar measures from the ECB, therefore, this is reflected in the quotations on the stock market. “Judging by the fact that the cost of Russian CDS returned to the level of April-may 2014, the appetite for risk among investors is that they are willing to ignore any geopolitical and macroeconomic risks associated with Russia,” he concludes.
Head of Department of debt tools “Aton” Konstantin Glazov says that after the decision of the Bank of England yield debt instruments of developed countries in the early fall. For example, the yield on ten-year US treasuries now stands at 1.56% per annum, and sovereign paper of Germany traded with negative yields a negative 0.7%. “Investors trying to make money in emerging markets,” notes the analyst. According to EPRF Global, in July, the bond funds invested in emerging markets $14 billion.
In the “URALSIB” believe that the excessive demand for Russian securities in part due to their deficit among investors. By estimates of analyst FK “URALSIB” Dmitry Dudkin, since the imposition of sanctions in 2014, the market of corporate Eurobonds of the Russian Federation decreased by 20%, or $31 billion This has led to the decline of yield of Eurobonds since the beginning of the year by more than 1.5 percentage points (from 6.05 to 4.35% per annum). The expert believes that till the end of the year, yields on Russian debt securities could fall by another 0.5 percentage points “Significant rally I do not expect, because the market is already at the highs. Most likely, we will see increased demand from investors, and the periods of correction in the market,” said Dudkin.
The demand for Eurobonds may spur issuers to new placements. Director of debt capital markets at ROSBANK Anton Kiryukhin believes that before the end of the year of Russian issuers can place securities amount to $3-5 billion of Eurobonds. “Traditionally we expect that this will be the exporters and the financial sector”, — he said. The investment banker added that a number of issues issuers will undertake to buy back from the market over short and expensive paper.
In the autumn a number of Russian issuers can place its Eurobonds, says the head of debt capital markets “VTB Capital” Andrey Soloviev. “It can be and steel companies, and transport and financial sector,” says the investment banker. According to him, the more likely issuers will be to place small issues — no more than $300-500 million