Bi-Weekly FICC Strategy - November 18, 2021. Volatility to Persist on the Back of Geopolitics

> Oil: Market expectations that the US administration will intervene to try to cool gasoline prices are building. As political pressure continues to mount, ultimately it will be the president's decision whether or not to tap the SPR, and that may simply be a function of whether or not oil and gasoline prices are front-page news this week. In our view, any selloff related to an SPR announcement would be short lived and would not structurally alter the market.> Ruble: Geopolitical tensions have intensified recently, while the greenback has rallied globally on the back of high US inflation and expectations of a more hawkish Fed. This has pushed USD/RUB to 73.5, its highest level since September. However, ruble demand has increased at this level and should remain high as exporters are set to pay R0.8 trln of MET next week. As long as the geopolitical situation doesn't deteriorate further, we think the ruble could return to 71.5 by the end of November, but the risks are likely to remain high.> OFZs and ruble rates: In light of the multiple lingering uncertainties, we still advise staying defensive, i.e. being positioned for a potential deeper inversion of ruble rates curves. Weekly inflation and geopolitics could still play out in either a positive or negative way for the market in the short term.> EM bonds: We expect rising US Treasury yields to pressure EM debt over the next two weeks, with spreads widening by 15-20 bps, and inflows displaced by small outflows.> FSU sovereign Eurobonds: The near-term outlook for the FSU space remains clouded by geopolitical uncertainty. Belarus's Eurobond quotes are likely to remain highly volatile over the short term due to the migrant crisis, but over the longer term we do not foresee any problems with debt servicing thanks to the country's improved liquidity position.> FSU corporate and banking Eurobonds: We expect corporate Eurobonds to remain under pressure from geopolitical developments and a potential rise in benchmark dollar rates. Primary supply appears set to decline, which should support the market.> FSU primary Eurobond market: We expect the volume of new supply to decrease in the coming weeks as corporate borrowers have mostly met their borrowing plans for the current year.