October heats up the bond market; The RTS hits all-time high
Something unusual happened on the currency market this week. Despite the extreme ruble shortage (on certain days the short-term IBC rate shot up to 30% p.a.), dollars were in high demand. Thanks to this demand, the dollar rose by 10 kopecks on Monday to 31.61 rubles to the dollar. As October arrived, the liquidity of the banking system improved while the dollar exchange rate fell. The demand for dollars fell as Russian credit institutions expanded their ruble positions and dollar weakened on the international currency market. “At the same time, traders are expecting the dollar to keep rising, and in the near future, rates should begin going up again. This increase is unlikely to be dramatic, however. It’s more likely that the rate will range from 30.50 to 30.80 rubles to the dollar,” believes Andrei Larkin, Financial Director at DeltaBank.
Price changes on the federal bond market were closely connected to investors’ ruble resources. Early in the week, investors sold their bonds under the sway of the severe ruble deficit. The biggest decline in quotes came in the short-term sector. After the situation on the money market returned to normal, the bond market moved upwards as trading decreased and demand was focused on short-term and medium-term OFZ bonds. According to Mikhail Avtukhov, Director of the Federal and Corporate Bonds Operations at Guta Bank, this week quotes will move in various different directions with a tendency to increase slightly.
The lessening of the ruble liquidity crisis which came at the end of September and a steady demand for liquid assets on the part of Western investors meant confident a growth in capitalization for the sub-federal and corporate bond market. The price for top-tier corporate bonds rose by an average of 60 base points and sub-federal bonds rose by 20. “Sub-federal bonds were prevented from growing more actively due to the rather large supply of Moscow municipal bonds. Trading in the 30th series of Moscow bonds placed the day before exceeded one billion rubles, but their price relative to placement price only rose by 20 base points,” commented Anastasia Shamina, an analyst at Zenit Bank.
The price for foreign debt securities increased this week as the yields on American bonds went down. “In the near future, the foreign debt market will most likely see the gradual rise in quotes continue. However traders will remain relatively inactive,” observes Alexander Potavin, Director of Information and Analysis Division at Lefkobank.
The big event on financial markets this week came when the RTS index hit an absolute all-time high of 588 points (the previous record, 571.7, has stood since October 1997). According to Yuri Makeyev, an analyst at IT Invest, the main factor behind the rise in prices was fresh resources from the YUKOS buyback entering the market. Investor optimism was brought about by a renewed increase in oil prices and recent good news from oil companies. This included Surgutneftegaz’s plans to significantly increase production and refining in 2004 and LUKoil’s upcoming report for the first half of 2003 and rumored interim dividends. As a result, Surgutneftegaz rose by 9.8%, LUKoil by 6.6%, and Sibneft by 5.1%. RAO EES on the other hand lost 0.9% of its capitalization. Artem Dzyura, Director of the Securities Market Operation Division at Orgresbank, explained investors’ loss of interest in the company, saying that along with RAO EES shares, cash may also be recognized as a method of payment at auctions to acquire OGK stock.
The Financier’s Date Book
October 10 TV-3 places 0.75 billion rubles in bonds
October Svyazinvest releases its consolidated annual report for 2002 according to international accounting standards
November 30 Uralsyazinform announces its results for the nine months of 2003 according to the Russian Accounting Standard
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