Last week’s main events

February 20 - Inteko placed 1.2 billion rubles in bonds and SUEK (The Siberian 
                       Coal and Energy Company) placed 1 billion rubles in bonds. 
                      -The government paid off 2.1 billion rubles in foreign debt. The gold and
                      currency reserves were shrunk by 1.3 billion rubles. 
                      - Transneft brought the second phase of the Baltic Pipeline System on
                      line. The company’s stock gained 5.75%.
                      - Gazprom approved a long-term debt management strategy. The price
                      of Gazprom shares increased by 4.82%.

February 24 - President Putin dismissed the cabinet. The RTS Index fell by 1.4% at 
                       closing, while the dollar gained 4 kopecks.
                       - Ernst & Young appraised Mosenergo at $.06 per share. Mosenergo
                       quotes fell by 4.2%.
                       - Officials have postponed making a decision about how to configure 
                       RAO EES regional power generation companies. RAO EES stock lost
                       3.05%.

February 25 - The Ministry of Finance placed additional OFZ bonds via auction for a
                      total of 1.5 billion rubles. Additional placements on the secondary
                       market totaled 0.5 billion rubles.
                       - Krasny Vostok placed 1.5 billion rubles in bonds.

February 26 - Surgutneftegaz resolved to pay 6.2 billion rubles in dividends. News
                     that Surgutneftegaz is negotiating with YUKOS to buy one of its
                      subsidiary divisions sent the price of Surgutneftegaz stock up by 5.6%.
                      - YUKOS’ controlling stake in Sibneft was frozen.

It was the same old same old this week on the currency market. Over the course of the week, the dollar continued to fluctuate between 28.48 and 28.54 rubles to the dollar. Despite heavy trading, there were no major sales of hard currency. Any attempts to send the dollar downward met with resistance from the Central Bank. On Tuesday, the dismissal of the cabinet unexpectedly helped prop up the dollar, and the dollar rate immediately rose by 4 kopecks. Already by closing, however, investor reaction had faded. The ruble had only lost one kopeck by the end of the week.
On the domestic bond market, no single trend emerged from this week’s fluctuating quotes. Before the long weekend, buying predominated and prices rose accordingly. After the cabinet’s dismissal, GKO-OFZ bond prices fell, but not for long. Excessive ruble liquidity and the exchange rate again defined the market (correspondent accounts did not fall below $206 billion and the short-term IBC rate fluctuated around 0.7%). At its auctions on Wednesday, the Ministry of Finance broke with tradition and did not offer a market premium. Investor interest turned to the secondary market. Yields on long bonds fell by 0.1-0.4% for the week.
Investors on the sub-federal and corporate bond market concentrated on the most liquid issues last week. These fell more sharply than other issues after the cabinet’s dismissal. On Thursday, investors started to buy up the now cheaper bonds, which led to a price increase for top-tier corporate and long Moscow municipal bonds (their spread versus GKO-OFZs sunk to a record 40 points). The yield on first issue Vneshtorgbank bonds fell by 0.6%. Nortgaz also distinguished itself (-0.3%). The MICEX corporate bond index remained practically unchanged for the week.
The week started out slow on the Eurobond market, as markets in Russia and Latin America were closed. However, by Tuesday a wave of sales inundated the market and the spread for the Russian segment increased by 2 points. For the rest of the week, the state sector saw prices fluctuating, and on the corporate market selective sales predominated.
The RTS Index, which gained 2% for the week, reached yet another all-time high. In the lead were Sberbank (+7.6%) and companies unaffected by political risks such as Rostelekom, which gained 6.4%. Almost all oil companies ended up with gains, as well. Surgutneftegaz shares increased in price by 6.1% for the week. The only exceptions to the upward trend were YUKOS (-1%) and the energy industry, as Mosenergo lost 1.2% and RAO EES 0.3%.

The Financier’s Date Book

March 4            Sverdloenergo places 0.5 billion rubles in bonds

                          Mosenergo Board of Directors meeting