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UFS Investment Company - Daily review of the debt markets, Jul 23, 2012.

Markets

On Friday Russian Eurobonds were mainly in decline due to new negative news from Europe. Decline in the sovereign sector totaled 0.3% on average, whereas the fall in most corporate Eurobonds didn't exceed 0.1%.

(To view the original document, please click on the link below:

http://reports.aiidatapro.com/brokers/UFSen/23.07.2012.pdf)

American indices settled down on Friday. S&P500 slid 1.01%; Dow Jones Dow Jones

the best known of several U.S. indexes of movements in price on Wall Street. [Am. Hist.: Payton, 202]

See : Finance
 dropped 0.93%. Brazilian index Bovespa decreased 2.08%.

European indices closed down as well. FUTSEE 100 lost 1.09%, DAX edged down 1.90%, French CAC See Consumer Advisory Council.  40 went down 2.14%.

The contract for Light Sweet closed down 0.90% as well as Brent. Today Light Sweet is traded at $90.2 (-1.78%); Brent is $105.31 (-1.42%). The spread between Brent and Light Sweet slightly narrowed to $15.11.

Precious metals trade on a negative note. Gold is $1576.15 per troy ounce Noun 1. troy ounce - a unit of apothecary weight equal to 480 grains or one twelfth of a pound
apothecaries' ounce, ounce

troy unit - any of the unit of the troy system of weights
; white metal dipped to $27.02. AU/AG ratio slightly rose to 58.33.

Key Statistics Today:

Cabinet Office Monthly Economic Report (Japan);

Chicago Federal National Activity Index (16:30);

Eurozone Eurozone
Noun

same as Euroland

Eurozone neurozona, zona euro

Eurozone nzona euro 
 Consumer Confidence (18:00).

News and Statistics

Germany

Inflation in Germany continues rapid decelerating: producer prices added just 1.6% in June which is worse than 2.1% growth in May. Just a year before producer price growth was 5.6% y/y. In June producer prices declined 0.4% m/m.

Russian Eurobonds After a few weeks of relative slackness European debt market entered the new phase of aggravation. On Friday fears suddenly grew over Spain after news came that one of the largest Spanish regions,Valencia, will probably request financial aid from the Spanish government
  • Chief of State
  • King Juan Carlos I, since November 22 1975
  • Head of Government
  • President of the Government: José Luis Rodríguez Zapatero, elected 14 March 2004.
 in the volume of 18 billion

euros, since it is unable to service its debt. It made the market worried that the Spanish government will probably have to ask EU aid not only for banking system recapitalization but also for budget financing.

As a consequence, EUR/USD dropped to the two-year minimum of 1.2094 which caused a selling wave in stock and debt emerging markets. Russian sovereign Eurobonds responded to the negative news with sharper dynamics than

corporate bonds. Russia-30 lost 0.45% dipping to 124.0% of the nominal. 5-year Russian CDS cost rose 7 b. p. to 192 b. p.

Prices of corporate Eurobonds changed insignificantly with decline not exceeding 0.1% in most bonds. However, some long issues reacted to the external negative. Thus, Vimpelcom-18 and Vimpelcom-21 lost about 0.4%. In the oil and gas

sector LUKOIL underperformed, notable Lukoil-17 and Lukoil-20 went down 0.3%. Long-term bonds of Severstal, Sberbank as well as MTS-20 decline by more than 0.2%.

On Monday morning negative background prevailed in the market. Brent decreased by more than 2.0% on the negative news from Europe and fears of further Chinese economic slowdown. European stock markets opened with a more than

1.0% decline, while Russia-30 plummeted 0.8% in the morning. Evidently, today Russian Eurobonds will close with a deep collapse. The negative dynamics is likely to persist during the week.

Foreign Bonds

Europe

As we mentioned above, fears of probable Valencia's need for the government's aid for debt service triggered decline in most markets on Friday. Besides, it caused a drastic growth of Spanish bonds' yields. Thus, the yield on Spanish 10-year

shot to 7.5% (!), which is the all-time maximum since the moment of the country's entrance in the currency union. Meanwhile, the yields on 2-year bonds of Germany, Netherlands and Switzerland got into the negative territory reflecting the flight to quality.

It is not only Spain that raises concerns - Greece is worrisome again. Troika auditors will arrive to Athens on Tuesday to check financial system and the reform implementation. It is already clear that Greece didn't manage to achieve the target readings and carry out the necessary reforms owing to deep recession and political uncertainty in May-June. Mass media report the country will need additional budget infusions of 10-50 billion euros. Earlier IMF IMF

See: International Monetary Fund


IMF

See International Monetary Fund (IMF).
 officials announced that they aren't; going to allot al·lot  
tr.v. al·lot·ted, al·lot·ting, al·lots
1. To parcel out; distribute or apportion: allotting land to homesteaders; allot blame.

2.
 more funds than agreed by now.

(More: http://reports.aiidatapro.com/brokers/UFSen/23.07.2012.pdf)

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Publication:Russian Banks and Brokers Reports
Date:Jul 23, 2012
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