Bi-Weekly FICC Strategy - July 14, 2021. Watching out for Central Bank Signals

> Oil: The crude oil market is looking at a 3 mln bpd deficit for August, even as downside risks to Asian demand are increasing due to the worsening coronavirus situation. Even if summer demand underperforms, the gap between demand and supply seems too wide for the oil market to turn bearish this summer.> Ruble: We expect the ruble to continue strengthening over the next two weeks, provided concerns over the new Covid strain do not escalate globally. Flow-wise, the second half of the month should be more supportive than the first half as large dividend and tax payments by exporters are looming.> OFZs and ruble rates: We advise sticking to defensive positioning going into the CBR meeting on July 23 and still prefer flatteners. The CBR could hike rates by as much as 100 bps and deliver hawkish remarks given the absence of a sustainable slowdown in inflation and inflation expectations at the moment.> EM bonds: We do not see any potential triggers for a sharp uptick in US Treasury yields in the coming weeks. There are not any major macro releases scheduled, and the US infrastructure bill that was submitted to Congress in June seems to have stalled. > FSU sovereign Eurobonds: Should US Treasury yields roll back up to more justified levels, we would expect Russian sovereign bonds to remain resilient, dollar and euro-denominated alike. Recent news flow on Ukraine has become more benign, which should help its spreads to tighten. > FSU corporate and banking Eurobonds: Trading volumes have been thin. We do not expect prices to move much in the coming weeks.> FSU primary Eurobond market: In the last two weeks, Ukrzaliznytsya (Ukrainian Railways) placed a $300 mln, 5y Eurobond at a 7.875% coupon in order to refinance part of its short-term debt. Uzbekistan also placed a new sovereign issue due in 2031.