Morning Commentary: Leaders from Ukraine, Russia set to meet; Russia CDS flat; TMK bonds widen

By Christine Van Dusen

Atlanta, Aug. 26 – Emerging markets assets put in a quiet morning session on Tuesday following the holiday in the United Kingdom and ahead of a meeting of the presidents of Ukraine and Russia.

The meeting is supposed to focus on gas supplies and trade, but investors are looking for signs that the leaders want to calm the conflict at Ukraine’s eastern border.

“Expectations are low for a breakthrough,” a London-based analyst said.

Sovereign bonds from Ukraine entered the shortened week lower, with the 2023s closing Friday at 89.4 bid, 90.9 offered, according to a report from Eavex Capital.

Meanwhile, credit default swap spreads for Russia were mostly flat and trading activity was limited, he said.

In other news from Russia, Moscow-based OAO TMK released second-quarter earnings that came in slightly below consensus.

The company’s 2017 bonds have widened almost 200 basis points and the 2020s about 177 bps since sanctions by the United States and other western governments and as a result of a low cash balance, the analyst said.

But even though its bonds have been “among the worst performers” since the United States instituted sanctions, “we believe TMK offers a potentially attractive story in the long-term, given the potential benefits of the Gazprom Power of Siberia project,” he said.

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