Page 105 - RusRPTDec21

December 2008.
8.5 Fixed income
The exodus of investors from the debt obligations of developing countries affected Russia. There hasn't been such a sale of OFZ since spring
Last week, non-residents withdrew the equivalent of $1bn from ruble government bonds, Kommersant writes. This is a weekly high since April, when the share of foreigners in OFZs fell below 20% due to sanctions risks.
What is happening is part of a worldwide sell-off of risk under the double blow of a new strain of coronavirus and expectations of an earlier increase in the key rate in the United States. Bloomberg notes that in the sales of the largest exchange-traded fund EM J.P. Morgan had two clear peaks: after Jerome Powell's second term as Fed chairman and after news of the omicron strain late last week. “We simply do not see a positive context for emerging markets,” the agency quotes a letter from Citigroup analysts.
According to Bloomberg, traders withdrew $854mn from dollar-based funds targeting EM and selected countries in the week by November 26. And according to BCS Global Markets (takes into account data from Emerging Portfolio Fund Research, EPFR), in the week by November 24, foreign investors withdrew $1.3bn from GEM bond funds.Over the past two months, the outflow exceeded $10bn.
Despite the departure of non-residents, rates on the Russian debt market fell for four trading sessions in a row, Kommersant notes. On Monday, the yield on ten-year OFZs dropped to 8.33% per annum, the lowest since November 19. For now, experts associate this with the Thanksgiving pause, due to which the influence of American investors on the Russian government bond market was small.
Against the oversaturated news background, the planning horizon of many OFZ market participants narrowed to one trading day. Sentiments will change chaotically - especially considering the end of the year and the desire of investors to fix positions before the holidays, Senior Vice President of the Office for Market Research and Strategy of Rosbank, Yuri Tulinov, told Kommersant.
The market will closely watch the inflation data and the position of the Central Bank before the meeting at the rate on December 17. In the event of an unfavorable development of the epidemiological situation, the regulator did not rule out its decline - which means that the worse the news, the more likely the further accelerated exit of non-residents from OFZs.
However, the MMI Telegram channel, founded by Kirill Tremasov, the director of the monetary policy department of the Central Bank, reminds that a key rate cut is an extreme scenario, and even if the situation deteriorates significantly, there will be a maximum pause. “If nothing happens in the next two weeks,
105 RUSSIA Country Report December 2021 www.intellinews.com