Morning Commentary: Russian bonds tighten ahead of convoy arrival in Ukraine; Turkey tightens

By Christine Van Dusen

Atlanta, Aug. 13 – Bonds from Russia were tighter at the start of Wednesday’s session as investors awaited news on the truck convoy heading to the border with Ukraine.

The fleet of 280 military vehicles is said to be carrying foreign aid, but Ukrainian officials have their doubts, given that the Red Cross has not been consulted or involved.

“All focus remains on the Russian aid convoy and how Ukraine will react when it reaches the border [this week]. Ukraine has been quite clear that they want the aid unloaded at the border,” a London-based analyst said. “Overall, tensions and suspicions remain ever-present, but the market does appear to be focusing on the positive headlines and potential for a deal on the aid.”

Indeed, credit default swap spreads for Russia tightened by 6 basis points while Russian banks saw their bonds narrow by between 10 bps and 15 bps, the analyst said.

“Russian corporates are also better,” he said, pointing to the 10-bps tightening by OAO Rosneft. “Elsewhere, Turkey sovereign cash is circa 5 bps tighter, helped by the generally better tone.”

In other news from emerging markets on Wednesday morning, South African mass media company Naspers Ltd. was downgraded to BB+ from BBB- by Fitch Ratings.

Naspers was cut to junk because the company has made larger-than-expected investments in global e-commerce and sub-Saharan pay-television opportunities, the ratings agency said in its report.

“Bonds are 25 bps to 35 bps wider this morning,” said a trader who focuses on the Middle East and Africa. “In the region, there is good demand as investors return from holidays.”

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