Morning Commentary: Russian bonds strengthen after previous day’s pressure; Middle East flat

By Christine Van Dusen

Atlanta, March 5 – Russian bonds opened slightly stronger on Thursday morning after coming under pressure on Wednesday as investors reacted to the possibility of increased sanctions from Europe, a London-based analyst said.

An official said that the United States, which recently announced an extension of sanctions against Russia, is “working closely with Europe on deeper [sector-focused] sanctions. She emphasized that the U.S. wanted to move together with Europe on sanctions if violence escalates,” he said.

Russian bonds were also reacting to oil price declines on Wednesday, he said.

Paper from Turkey opened mostly unchanged on Thursday following a weak Wednesday session that stemmed from the devaluation of the lira.

In other trading on Thursday morning, Croatia’s new issue of 3% notes due 2025 that priced at 97.845 to yield mid-swaps plus 255 basis points was spotted near reoffer, he said.

Barclays, Erste Group, JPMorgan and UniCredit/Zagrebacka banka were the bookrunners for the Regulation S deal.

Spreads for Middle Eastern bonds started out Thursday mostly flat, a trader said, after investment grade names tightened on Wednesday between 1 bp and 4 bps.

Asian bonds put in a subdued session on Thursday, with high-grade cash bonds closing unchanged, a London-based trader said.

“The focus was mainly on new issues as real-money accounts were sidelined,” he said. “Most of the demand at these yield levels has been filled.”

Banks from Turkey saw mostly sellers on Thursday, even before credit default swaps spreads for the sovereign backed off, another London-based trader said.

“Not a surprise, as buyers had been few and far between for a few days, and the lira is still under pressure,” he said.

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