The government securities market During February, the market of government currency-denominated bonds was displaying a certain growth in the yields to maturity of tradable issues. Early in the month, the US macroeconomic statistics were published, demonstrating that the US economy had been growing, and the pressure of inflation remained as before. As a result, the quotations of Russian currency-denominated bonds fell in face of the growing yields to maturity of US treasury bonds. The month’s second week was marked by a certain growth in the quotations, despite the downward trend displayed by US securities. The level of prices was supported by the declaration, made by RF Minister of Finance A. Kudrin, that Russia during the current year was planning an advanced repayment of its debt to the Paris club in the amount of $11-12 billion. Later the growth continued, despite the speech of B. Bernanke, the new Director of the US Federal Reserve System (FRS), who commented on the stable growth of the US economy and the probable necessity of raising the level of the basic interest rate in order to suppress inflation.
As of February 22, the yields to maturity of Russian eurobonds RUS-30 amounted to 5.60 % per annum, those of RUS-18 – to 5.76 % per annum. As of the same date, the yields to maturity of Russian eurobonds were as follows: Tranche 7 of the Minfin bonds – 5.34 %, Tranche 6 of the Minfin bonds – 4.63%, Tranche 5 of the Minfin bonds – 5.32 %, RUS-07 – 5.36 %.
Early in February, the government rouble-denominated debt market demonstrated a slight positive adjustment after the fall in prices at the end of January. Also positive, as before, was the situation on the primary market, where the demand for securities being placed was higher than their supply. Later on, improved money liquidity in the banking sector promoted increased turnovers on the secondary market and contributed to a relative stability in quotations. The month’s third week was hallmarked by the placement on the market of OFZ-AD Issue 46020 with a 30-year maturity. This issue was rated by the international agency Standard&Poor’s as equal to RF roiuble-denominated liabilities (ÂÂÂ+). As far as the secondary market was concerned, supply there was noticeably higher than demand, which resulted in a fall in prices. Toward the month’s end, the trading activity on the rouble-denominated bond market displayed a decline, which was in part due to a somewhat more complicated situation with money liquidity resulting from the payment of VAT, even despite some positive signals from the currency market. Against this background, the yields to maturity of GKO-OFZ were going up.
In the period between 1 and 26 February, the aggregate turnover on the GKO-OFZ secondary market amounted to approximately 94.3 billion roubles, the daily average turnover being at the level of 5.55 billion roubles (about 80 billion roubles, with the daily average turnover at the level of 5.77 billion roubles, in January). Thus, despite the marked growth of the aggregate trade turnover, the daily average indices of trading activity in February became somewhat lower than those seen in January.
When preparing this overview, the author used, as sources, the analytical materials and reviews issued by the “Zenit” Bank, the IC “ATON”, the MICEX and the RF CB, as well as the official web sites of Russian companies - issuers of securities.
Minfin bonds' yields to maturity in December 2005 - February 6.0% Tranche 5 Tranche 6 Tranche 5.5% 5.0% 4.5% 4.0% 3.5% FIGURE 2.
Yields to maturity of the Russian eurobonds with maturity in 2030, 2018 and 2007 in December 2005 - February 6.5% USD-2030 USD-2007 USD-6.0% 5.5% 5.0% 4.5% During February, several auctions were held on the primary market. Thus, at the auction for an additional placement of OFZ 25059 in the amount of 2.51 billion roubles, the demand amounted to approximately 7.8 billion roubles, the amount placed was approximately 2.5 billion roubles in face value, while the weighted average yield amounted to 6.39 % per annum. At the auction for the placement of 01.12.05.12.07.12.09.12.184.108.40.206.220.127.116.11.23.12.11.01.13.01.17.01.19.01.23.01.25.01.27.01.31.01.02.02.06.02.08.02.10.02.14.02.16.02.20.02.22.02.01.12.06.12.09.12.18.104.22.168.22.12.11.01.16.01.19.01.24.01.27.01.01.02.06.02.09.02.14.02.17.02.22.02.OFZ 25060, the issue volume was equal to 8 billion roubles, whereas the demand amounted to approximately 14 billion roubles, with the resulting placement volume in face value amounting to 4.billion roubles, and the weighted average yield – to 6.3 % per annum. The month’s third week was quite eventful in terms of placements, because three auctions took place: for the placement of OFZAD Issue 46020 (placement volume – 3.5 billion roubles, weighted average yield – 6.99 % per annum); OFZ-PD Issue 25060 (placement volume – 6.9 billion roubles, weighted average yield – 6.31 % per annum); and OFZ-AD Issue 46017 (placement volume – 7.9 billion roubles, weighted average yield – 6.73 % per annum). And on 22 February, OFZ-PD Issue 25060 was placed in the amount of 3.4 billion roubles, with the weighted average yield of 6.3% per annum, and OFZ-AD Issue 46020 in the amount of 4.4 billion roubles, with the weighted average yield of 7 % per annum.
As of 28 February, the GKO-OFZ market volume amounted to 766.04 billion roubles in face value and 756.17 billion roubles – in market value. The GKO-OFZ market portfolio’s duration was 1961.days.
The corporate securities market The situation on the share market.
In February, stable growth of quotations was once again seen on the Russian share market, and as a result the RTS index reached its new historic high. During the month’s first few days the market was on the decline due to the influence of some technical factors produced by the significant growth throughout January. One of the reasons for the fixed gains was the announcement made by Morgan Stanley Capital International that the “Gazprom”’s shares will be included in the MSCI Russia index only as late as the end of May, while initially it had been planned to happen in February. Even the rather optimistic declarations of RF President V. Putin did not have any significant effect on the market. The external situation was also remaining moderately negative: the indices of the stock markets in developed countries were displaying a downward trend, as were the oil quotations on the world market.
100 1 600.The total volume of trading ($) 1 500.The RTS Index 1 400.1 300.1 200.1 100.50 1 000.900.800.700.600.500.400.However, later on the market demonstrated predominantly upward dynamics, which were sustained until the month’s end. In mid-month, market growth was contributed to by the favorable domestic and external situations. The US stock market was growing against the backdrop of falling oil prices. Mar points mln US dollars s 12.01.28.01.15.02.04.03.23.03.08.04.26.04.16.05.01.06.20.06.06.07.22.07.09.08.25.08.12.09.28.09.14.10.01.11.18.11.06.12.22.12.17.01.02.02.20.02.ket growth was in part due to growing demand, with the resulting increase in the quotations of the “second echelon” shares, whose dynamics during January was lower than that of “blue chips”. However, one of the significant factors for an overall market growth became the upsurge demonstrated by the shares of the “RAO ‘UES of Russia’” in response to the positive outcome of the meeting of A.
Chubais with the RF President. A stable upward trend was also supported by a sufficiently high inflow of free monies on the market, despite the reevaluation of some of the securities. Toward the month’s end, market growth was sustained by a changed trend of the oil quotations on the international market, which had previously been going down during the greater part of the month, by a favorable level of the rouble’s liquidity, and by a moderately favorable situation on the world stock markets.
On the whole, during the period between 1 and 28 February 2006, the RTS index grew by 8.5 %, or to 1453.44 points, which in absolute terms amounts to 113.87 points. In the same period, the turnover volume of the shares incorporated in the RTS index was about $ 866.05 million, the average daily turnover being at the level of $ 46.6 million (against $ 1.095 billion, with the average daily turnover at the level of $ 68.45 million in January). Thus, the investor activity on the stock market in February was somewhat lower than in the previous month. The indices of maximum and minimum turnovers in the trade system in February were $ 78.8 million (on 28 February) and $ 22.75 million (on 7 February), respectively.
Judging by the month’s results (from 31 January through 28 February), the rates of the majority of “blue chips” were rising. The leaders in terms of price growth were the shares of the “Rostelekom”, the “RAO ‘UES Russia’ ”, the “Tatneft” and the “Mosenergo”, whose rates during the month went up by as high as 50.22%, 40.53%, 36.24% and 25%, respectively. Noticeably lower growth rates were demonstrated by the shares of the “Surgutneftegas” (9.49%), the “LUKoil” (4.43%), the GMK “Norilskii Nikel” (Nornikel) (4.32%), the Sberbank of Russia (3.69 %) and the “Sibneft” (3.41 %). At the bottom of the list of shares whose prices went up in February are the shares of the “Gazprom”, with their price growth of 1.48 %. Negative growth, according to the month’s results, was demonstrated only by the shares of the “Yukos” (-1.79 %).
Dynamics of the Russian Blue Chips from January 31 to February 28, 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% Change in price (%) Ukos Tatneft Sibneft GMK LUKoil Russia Gazprom Russia NorNikel RAO UES Mosenergo Rostelekom Sberbank of Surgutneftegas In February, the list of leaders in the RTS turnover10 was as follows: the “Gazprom” (38.79 %), the “RAO UES of Russia” (15.81 %), the “LUKoil” (11.73 %), the GMK “Norilskii Nikel” (5.04 %), the Sberbank of Russia (4.53 %), the “Rostelekom” (3.57 %), and the preference shares of the “Transneft” (3.09 %). Thus, the aggregate share turnover of these issuers amounted to about 82.56 %.
As of 28 February, the five leaders in terms of capitalization on the domestic share market were as follows11: the “Gazprom” - $ 187.61 billion, the “LUKoil” – $ 70.67 billion, the “Surgutneftegas” – $ 55.2 billion, the “RAO UES of Russia” - $ 29.57 billion, the RF Sberbank – $ 29.29 billion, and the “Sibneft”– $ 21.57 billion.
The futures market. In February, the investors’ activity on the RTS futures market (FORTS) became markedly higher, as compared to the January indices. Thus, during the period from 1 through 28 February, the aggregate turnover of the RTS futures and options market amounted to approximately 142.83 billion roubles (264.29 thousand transactions, 109.78 million contracts), against 104.04 billion roubles (188.94 thousand transactions, 4.41 million contracts) in January.
The highest demand displayed by the market participants was, as before, for futures: the volume of trade in futures during the period under consideration amounted to 129.61 billion roubles (253.thousand transactions and 5.16 million contracts). Options were in much lesser demand – the volume of trade in them amounted to approximately 13.22 billion roubles (11.23 thousand transactions and 657.97 thousand contracts). The peak trade volume on the futures market was 10.07 billion roubles (on 27 February), while the lowest trade volume amounted to 5.24 billion roubles (on 2 February).
The corporate bonds market.
The situation on the market of corporate and regional bonds in February was worsening. Early in the month, the market was characterized by an absence of any uniform trend in the dynamics of prices, while the market situation was largely determined by the level of money liquidity. The lowering rouble/USD exchange rate and the rising yields on the external debt market were not contributing to demand growth. During the month’s second week, one more factor was added to the already mentioned factors that were suppressing the growth of quotations on the secondary market – that of placements on the primary market. Thus, investors’ attention was focused on the placement of the bonds of the City of Moscow, where demand was three-fold higher than supply.
The mid-month period was marked by a certain decline in the market prices, while the activity on the secondary market remained at the average level. However, a noticeable rise in the trading activity involving the most liquid securities was seen, with sufficiently high amounts being sold. Price growth was not promoted by the high volume of supply on the primary market, either. The rather favorable situation with liquidity in the banking sector can be regarded as the only factor that was supporting the price level. Toward the month’s end, multi-vectored dynamics in the quotations were observed, against the backdrop of an overall slightly negative trend. This was the result of both slight downward dynamics of liquidity and the rates of currency-denominated eurobonds, and a sufficiently high volume of primary supply.
Between 1 and 28 February, the price index of the corporate bonds tradable on the MICEX12 went down by 0.12 points (- 0.11%), whereas the index of the ten most liquid bonds of the corporate sector decreased by 0.21 points (- 0.17%). The aggregate turnover in the corporate bonds section of the MICEX, in the period between 1 and 26 February, amounted to approximately 18.89 billion roubles, with the average daily turnover being at the level of 1.11 billion roubles (as compared to approximately 14.27 billion roubles, with the average daily turnover of 1.02 billion roubles, in January). Thus, the trade turnover of Russian corporate bonds showed a certain growth, as compared to the January indices.
On the classical share market.
According to the RTS’ data.
This was calculated on the basis of the indices of the corporate bonds tradable on the MICEX, generated by the “Zenit” Bank.
FIGURE Dynamics of corporate bond indices 122.ZETBI-Corp ZETBI-Corp22.214.171.124.126.96.36.199.104.The external factors influencing the changes on the Russian stock market.