Last week the dollar lost 26 more kopecks, falling to 29.25 rubles to the dollar. The dollar is being attacked not only on the interbank market, but also on the money market. Before the holidays, the number of people selling dollars increased substantially, and the banking system was unusually liquid. On Wednesday correspondent accounts exceeded 210 billion rubles and the short-term IBC rate did not rise above 1.5%. However, Yuri Kiryanov, Director of the Dealing Division at Moskommertsbank, noted that the dollar is already falling less rapidly: “Dealers may want to take a small time out, as the exchange rate over the last two week has fallen by almost a half ruble. Moreover, the decline of the dollar on world currency markets has slowed a bit. It’s completely possible that before the year’s end an upward correction could occur on the Russian market, as market players close their shorts.”
The state of the federal ruble bond market was determined by the high level of ruble liquidity in the banking system and ruble’s increased strength on the currency market. However, the yield reduction rate for GKO-OFZ bonds remains extremely modest. “The peculiar nature of investors on the federal bond market and lower yields are not allowing the market to grow in the way other ruble bond segments are,” explains Dmitri Bogoslovsky, a debt instrument market analyst at Guta Bank.
The upward trend in prices for non-government bonds continued last week, fed by the rapid strengthening of the ruble and the financial system’s excessive liquidity. The yields on top-tier corporate securities and Moscow municipal bonds approached 9% p.a. At the same time, buyers were not extremely active, as the spread between non-governmental and OFZ bonds has reached the point where further reduction of interest rates requires the support of state bonds as well. “In the near future, consolidation on the corporate and sub-federal bond market is possible, while the medium-term outlook for the market remains positive,” believes Anastasia Shamina, an analyst at Zenit Bank.
The confident growth of US Treasury bonds and good conditions for developing markets supported the upward trend on the foreign federal debt market. “The main event recently was the meeting of the US Fed’s Open Market Committee, when it was decided to keep interest rates where they are for the foreseeable future,” recounts Anatoli Bogunov, Senior Specialist of Trade Operations at Sodbiznesbank. “This was greeted positively all in all by investors, so after the New Year’s holiday, US Treasuries have an excellent chance of increasing in price. It’s likely that Russian bonds will follow their lead.”
On the stock market, quotes moved in various directions as trading remained light. Extra rubles and the anticipation of a pre-New Year’s rally set the stage for price increases. However, the risk of negative consequences due to the YUKOS Affair forced investors to take a “wait-and-see” approach and prevented new funds from coming to the market. “The regular peak in prices for platinum and nickel stimulated demand for Norilsk Nickel shares,” notes Yuri Makeyev, an analyst at IT Invest. As a result, GMK stock gained 3.44%. Sibneft and RAO EES also ended up with gains of 3.4% and 2.5% respectively. Goldman Sachs’ lower recommendations regarding LUKoil shares led to profit fixation for all oil stocks. Both LUKoil and Surgutneftegaz remained market outsiders, losing 3.8% and 2.8%.

The Financier’s Date Book

December 22 Novosibirsk places 1.5 billion rubles in bonds
December 24 Tver Province places 1 billion rubles in bonds
December 25 Gazprom Board of Directors meets

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