Bi-Weekly FICC Strategy - June 2, 2021

> Oil: Oil prices have rallied further at the beginning of the month as OPEC+ has stuck to its plans to raise production in July, without giving guidance over further increases. Investors believe more supply will be needed for the market to avoid overheating amid the (albeit diminishing) prospects of a speedy return of Iranian barrels to the market and US summer demand so far proving the market right to be bullish on oil.> Ruble: Ruble volatility should remain subdued, as we do not expect investors to significantly alter their positioning ahead of the Biden-Putin summit on June 16. However, dividend-related FX demand should wane in the coming days, while the oil price appears set to remain elevated. These factors should all support the ruble and allow it to stabilize around USD/RUB 73 by mid-June.> OFZs and ruble rates: The releases on weekly inflation (due today and June 8), as well as monthly inflation (June 7) could further strengthen the case for a 50 bp hike from the CBR at the June 11 meeting. We expect the ruble curves to continue bear-flattening. > EM bonds: The rise in Treasury yields may be set to resume. There is a good chance the upcoming data from the US will be strong, which could push the 10y yield to 1.7%, as it would stoke concerns that the Fed will begin to start reining in its asset purchases in the near future.> FSU sovereign Eurobonds: Belarusian bonds could remain volatile until we see more clarity on the geopolitical front. Other high-yielding names will likely remain well-bid. Russia's spreads over BBB peers should remain stable over the near term, as they are trading in line with their respective 3y averages.> Belarusian economics: We expect economic growth to remain sluggish, constrained by the continued political uncertainty, tight monetary conditions and possible fiscal consolidation. > FSU corporate and banking Eurobonds: We think high-yield names will remain in demand and prefer Alfa Bank's and Sovcombank's T2 subs, the Borets 26 and Gazprom's euro-denominated perps in this market.> FSU primary Eurobond market: Borrowers may look to test the primary market following the May holidays.