Bi-Weekly FICC Strategy - April 16, 2021

> Oil: Oil has finally broken out of its recent trading range, primarily due to upward oil demand revisions for this year by OPEC and the IEA, while economic data out of the US and China has been upbeat .> Ruble: The ruble has strengthened since the Biden-Putin call and amid relatively mild US sanctions, as investors are hoping for a de-escalation of tensions. We expect international relations to remain the key driver for the ruble and Russian assets in the near future. Normandy format discussions on the Donbass are scheduled for Monday next week, while two days later Putin will deliver his annual address to the Federal Assembly. On Thursday and Friday he could take part in a global virtual climate summit. Ahead of these key events, we expect the ruble to trade sideways in a 75-77 range, as long as no further material political headlines emerge. We think the ruble is at a crossroads and could strengthen to 72-74 in the event of further signs that political risks are ebbing and more constructive Russia-US relations.> OFZs and ruble rates: The US government will ban US financial institutions from participating in the primary OFZ market starting from June 14, though the ban will not affect the secondary market. We believe the market reaction to the news has been rather positive, with OFZ yields trading 5-10 bps lower as we write versus Wednesday's closing levels, ahead of the sanctions news. All things considered, we still expect the CBR to hike rates by 50 bps next Friday. > EM bonds: Over the past two weeks, US Treasury yields did not move much despite a slew of data from the US showing a marked pickup in economic activity in March. We believe that a technical factor may have been offsetting the continuing rapid recovery of the US economy, allowing UST yields to take a break from their recent march upward, a trend we expect to resume over the next two weeks.> FSU sovereign Eurobonds: In the near future, Russian sovereign spreads will continue to be driven more by the geopolitical news flow than demand by foreign investors for EM Eurobonds. In addition, Belarusian paper continued to lag amid a lack of clear triggers. > FSU corporate and banking Eurobonds: Over the next two weeks, benchmark dollar rates should remain relatively stable, providing technical support to the Russian corporate space. Though some issues look oversold, volatility in Russian assets is likely to remain elevated given the geopolitical tensions.> FSU primary Eurobond market: Borrowers are set to test the primary market following the stabilization in dollar rates.