Bi-Weekly FICC Strategy - November 3, 2021. Hawkish Surprise Possible at Fed Meeting

> Oil: OPEC+ will meet on November 4 to discuss its supply plans. Last week, Saudi Arabia signaled caution about increasing output, while at the G20 summit, US President Joe Biden criticized Saudi Arabia and Russia for their inadequate response to managing supply. In our view, OPEC+ will stick to its gradual production increase strategy, which would be price-supportive. We see the upside as limited to $85/bbl this week. We also note that a major risk factor for Brent this week is the potential risk asset selloff following an expectedly hawkish Fed meeting.> Ruble: The ruble has lost more than 3% against the dollar over the past week. Should we see hawkish rhetoric from the Fed and geopolitical risks continue to linger, we could see the local currency retreat to 73 amid illiquid trading at the end of this week. However, this would render the ruble very attractive to buy given its strong fundamentals.> OFZs and ruble rates: We could see additional upward pressure on ruble rates in the first half of November due to persistently high weekly inflation, even though the current levels look excessively high from a fundamental standpoint, especially in the 5y+ segments of curves.> EM bonds: With inflation expectations at multi-year highs and no signs of supply bottlenecks easing, the Fed could deliver a hawkish surprise at this week's meeting, which would cause core rates to widen. > FSU sovereign Eurobonds: We retain our positive view on Russia's sovereign bonds. On a separate note, we expect the Kazakhstan 45 to make up for its recent underperformance versus Russia in the coming months.> FSU corporate and banking Eurobonds: Benchmark rates remained highly volatile over the past two weeks, and against this backdrop, in the Russian corporate quotes generally moved lower, especially high-grade names. For some issues, pressure also came from primary offerings priced at premiums to secondary levels.> FSU primary Eurobond market: We expect FSU corporates to be fairly active in the primary market through to the year-end once benchmark dollar rates have stabilized, although we anticipate modest volumes.