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Fedor Bizikov: Fixed Income Market Review
Fundamentals gave way to political factors in regard to price performance of the Russian assets. Recognition of the outcomes of Crimea referendum, accession of the Republic of Crimea in the Russian Federation and consequent Western sanctions are of crucial importance towards further dynamics of the Russian assets.
Last week the bond market was marked with a large-scale sell-off. The nature of the trading sessions and yield levels were in line with the figures of 2008. The yields of many Eurobonds approached 10%, which has little correlation with the financial position of their issuers. But for now investors are focused on assessing the prospects of sanctions that will be imposed against Russia by the U.S. and the EU.
On the global market the yields on 10-year Treasuries are at 2.6-2.7%. At tomorrow’s meeting the Fed is expected to run on further reduction of monetary stimulus by 10 billion dollars. Macroeconomic data on the U.S. economy, being rather weak in January-February, begin to show signs of recovery. So the Fed is unlikely to be kept from further tapering. We still expect the yields of treasuries to reach 3.2-3.5% by the end of this year. However, everything will depend on the news background. What counts most is that there is still potential for further growth.
Fedor Bizikov, senior portfolio manager
