Last week the dollar exchange rate continued to fall. In the first two days of the period under review, the dollar lost 27 kopecks. After the weekend, the Central Bank got involved and slowed any further strengthening of the ruble. The Central Bank’s insistence and the dollar’s stronger performance on world currency exchanges brought market players back to their senses. For the rest of the week, quotes fluctuated around 28.5 rubles to the dollar. “To all appearances, the dollar exchange rate will stay at this level for a while, and then will continue to fall, thanks to high oil prices and the influx of huge amounts of export revenue into the country,” believes Ruslan Tongiev, Director of the Trading Operation Administration at Petrokommerts Bank.
When Standard & Poor’s raised Russia’s credit rating, investors on the domestic state securities market reacted with moderate optimism. The heaviest trading was in long-term bonds. However, for the time being the Ministry of Finance is preventing any sharp increase in yields by means of additional placements. Next week, the ministry plans two additional placements of 24 billion rubles in total. “Quotes could fall somewhat early next week, especially for the issues being placed. Then we expect them to return to their previous levels,” says Dmitri Bogoslovsky, an analyst at Guta Bank.
The big event on the corporate and sub-federal market last week came when Moscow placed five billion rubles in six-year bonds. Demand was four times greater than the actual supply, and yields ended up far below predicted levels. The spread of these new bonds to federal OFZ bonds was 34 base points, which reflected the market’s extremely high expectations of a further decline in interest rates. In addition, this decline is limited by OFZ yields, and the Ministry of Finance and the Central Bank are getting in the way of an increase in prices by additional placements of new issues. Thus, by week’s end profit fixing began on the market. “Next week’s main event will be Gazprom’s placement of 10 billion rubles, which will define the direction of market for the foreseeable future,” believes Anastasia Shamina, an analyst at Zenit Bank.
Eurobonds did poorly this week. Quotes on Russian foreign debt securities plummeted after it was announced that the Fed would raise interest rates. “It is worth noting that for some time prior to the announcement, Russian Eurobonds were in fairly high demand. The moment investors found out that the rating on hard-currency bonds was still below investment level, the sales began,” recounts Dmitri Dudkin, debt analyst at NIKoil Financial Corporation. The second wave of sales came after the Fed Open Market Committee meeting, where economists hinted to fiscal authorities that they did not plan to keep interest rates low for long. The market reacted with a decline in quotes for US Treasuries, which quickly spread to Russian Eurobonds.
Trading on the stock market was fairly calm this week. The RTS Index only gained 1% for the week. Bad news about YUKOS again left the company among the market outsiders, and its shares lost 8%. “LUKoil stock remained stable and is the most promising investment among the oil sector blue chips,” commented Sergei Drozdov, Director of the Stock Administration at Olympiysky Bank. Tatneft led the market, gaining 12%.

The Financier’s Date Book

February 3 Gazprom places 10 billion rubles in bonds
February 4 Additional placements of bond issues OFZ-FK 27025 and OFZ-AD 46014, 12 billion rubles each
February 10 OPEC meets
February 11 The Southern Telecommunications Company places 1.5 billion rubles in bonds
February 12 Kristall Finance places 0.5 billion rubles in bonds