The dollar drifts downwards

RAO EES heats up the RTS

After three weeks of stability at 29.8 rubles, the dollar fell to a new Central-Bank

backed level of 29.73 rubles to the dollar last week. The ruble was helped by the influx of hard currency revenue and the emerging liquidity deficit in the banking system. The IBC rate rose from 2-4% at the beginning of the week to 6-9% by the end, and correspondent accounts ranged from 105-122.4 billion rubles.

The week passed uneventfully on the federal ruble bond market. Prices moved in various directions and the yield on the majority of issues remained practically unchanged. “There was some scattered demand for amortization issues, while the average trading volume remained relatively low at 120-250 million rubles,” recounts Mikhail Avtukhov, Director of the State and Corporate Bond Division at Guta Bank. According to Alexander Kudrin, a debt analyst at Troika Dialog, worsening ruble liquidity can only partially explain the light trading: “Now we are seeing the results of Ministry of Finance policy. By keeping yields low (7-8%), they are making the market unattractive to big investors.”

Rising quotes was the dominant trend in corporate and sub-federal bonds this past week. Prices corrected themselves after a week-long slump. For the first two days, trading was light, but things picked up considerably on Wednesday. Trading in more liquid papers (RAO EES, Alrosa-19, and Moscow municipal bonds) grew to record levels for this month. “Apparently, big investors began to establish their longs in anticipation of increasing prices at the beginning of the month and after the parliamentary elections. They are also looking to the slow period of late December-early January,” explains Avtukhov. Moscow Province and Komi bonds followed Moscow City’s lead, while Yakutia’s short-term bonds fell. “Rising prices this week combined with increased trading could mark the end of the sideways trend and the start of a new upward trend on the Russian debt market,” says Anastasia Shamina, analyst at Zenit Bank. “We think that in early December, quotes will continue to grow for the most liquid corporate and regional bonds.”

The American debt market continues to call the tune for Russian Eurobonds. “Overall, the market looks optimistic. An upward trend is also likely because in the first half of December investors will have their last chance this year to bet on an upswing because afterwards trading practically comes to a halt,” notes Kudrin.

The stock market “came to” this week after a formidable dive. The RTS Index grew by 13%, though trading was light. “The main intrigue this week involved RAO EES shares. Demand increased after Evrazholding announced that it would possibly increase its stake by buying up shares on the open market,” explains Andrei Kuznetsov, Director of the Project Financing Division at Olimpiysky Bank. “Prices increased more when the RAO Committee for Strategy and Reform announced that the final payment at auction for OGK shares would be in the form of RAO EES stock.” In addition, Gazprom and YUKOS had good results to report. By the end of the week, the market took a breather after five days of growth, thanks to new actions from the General Prosecutor. The leaders on the market this week were Tatneft, Sibneft, and RAO EES, which grew by 14%, 15%, and 18% respectively.

The Financier’s Date Book

December 2 MTS releases its results for the first three quarters of this year according to US GAAP standards

December 3 Krasnoyarsk Territory places 1.5 billion rubles in bonds

December 7 Duma elections

December 25 Gazprom Board of Directors meets