Bonds: Sanctions push Eurobond YTMs lower

Обзор облигаций 12.09.2014 Following yesterday's news of the impending sanctions against Russia being imposed as early as today, just ahead of gas talks scheduled on 20 September, investor sentiment improved slightly yesterday. A slight tightening in spreads caused the yield curve to adjust to the range of 9.83-12.30%, as UKRAIN 6.875% '15, UKRAIN 6.58% '16, UKRAIN 9.25% '17 UKRAIN 7.95% '21 and UKRAIN 7.80% '22 declined 79bp to 12.30%, 11.64%, 12.01%, 10.06% and 9.88% respectively, while UKRAIN 6.75% '17 and UKRAIN 7.50% '23 declined 78bp to 10.96% and 9.83%, respectively. The 5-year CDS declined to 1,034bp. Investment implications: Despite yesterday's positive movements, yields remain high; the decline in yields is very fragile and could reverse at any time. Yields could remain volatile at 10.0% or higher until the conflict in eastern Ukraine is resolved.