Bi-Weekly FICC Strategy - June 30, 2021. New Belarus Sanctions Softer than Some Feared

> Oil: This week's main event is the OPEC+ meetings. The group is considering whether to continue reviving more crude supplies given that global demand is bouncing back strongly from the pandemic.> Ruble: Over the next two weeks, US data and comments from the Fed could spur further global dollar strengthening, but the ruble could remain resilient near 73, protected by the CBR's hawkish stance and high oil prices, should geopolitical risks, which have intensified recently, be contained.> OFZs and ruble rates: The release of Russia's June inflation data on July 7 will likely largely determine the outcome of the upcoming CBR meeting on July 23. We think the risks are again tilted toward higher than expected inflation, which could well mean a larger than 50 bp rate hike from the CBR. We expect rate curves to continue flattening.> EM bonds: The consensus is calling for a 700k rise in US nonfarm payrolls for May this Friday. We think the number is highly likely to come in above this level, which could push the 10y Treasury yield closer toward 1.6%. > FSU sovereign Eurobonds: We think that Belarusian sovereign Eurobonds should be able to trim their recent losses in the near term, as the sanctions that were introduced last week were softer than many investors had feared. We note that the current spreads are close to the peak levels of 2020, which are the highest levels seen in the last five years. > Belarusian economics: New sanctions will hurt the Belarusian economy, constraining the country's GDP growth, external position and budget. However, the impact will be mild, as the restrictions were not as tough as some had feared. > FSU corporate and banking Eurobonds: Although UST yields look set to rise somewhat in upcoming weeks, given the thin trading in the summer, we think corporate bond yields will trade sideways over the next two weeks.> FSU primary Eurobond market: Over the past two weeks, Gazprom placed a 6y CHF500 mln Eurobond issue at 1.54% and Ukravtodor, Ukraine's state road agency, placed $700 mln in Eurobonds maturing in 2028 at a yield of 6.25%. We expect the backdrop for the primary market to remain favorable, so we would not be surprised to see new offerings over the coming two weeks.