Since the eginning of March, the primary ruble bond market has become increasingly active. According to figures from ING, total placements reached RUB542bn (about $17bn) in the first half of the year, with corporate debt making up 70% of that total volume.
"In fact, June's total placements of more than RBL200bn appear to be a historical high debt offering for a month," says Stanislav Ponomarenko of ING. "This is supported by a strong recovery of ruble debt demand, which is also evidenced by persistently tighter primary auction pricing compared to initial price talks."
Ponomarenko identifies improvements in risk appetite and ruble liquidity as the key drivers behind the local debt demand. Given the RUB2.7 trillion budget deficit expected over the second half of the year, ruble liquidity should get a significant boost in the quarters to come. "This may take additional support from likely balanced capital account flows. As such, we see potential liquidity inflow as sufficiently large to further support activity of the primary ruble debt market," he says.
On the flip side, the positive trends on the ruble debt market remain quite sensitive to the global appetite for risk and the oil price. If the oil price falls to the $40-50/barrel level together with a new wave of risk aversion, Ponomarenko doesn't expect much local debt support from budget liquidity injection. "On the contrary, in this situation increasing ruble liquidity inflow risks intensifying the oil price pressure on the domestic currency and yields," he says.
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