Bi-Weekly FICC Strategy - September 8, 2021. CBR to Retain Hawkish Tone

> Oil: Following Hurricane Ida, the market balance for both crude oil and refined products got a whole lot tighter. In light of this, the rather subdued rally in prices is somewhat baffling to us. As for the next two weeks, we think Brent will continue to trade close to its 50-day moving average, which is currently near $72.5/bbl, though it may at times attempt to break above resistance at $73.7/bbl, having failed to do so on two occasions recently. > Ruble: We expect the dollar to keep firming globally, as US inflation appears set to remain high, while the Fed's new economic forecasts could lead to higher dollar rates and yields even in the absence of a tapering announcement. However, the ruble should find support from a hawkish CBR and a 50 bp key rate hike, which should enable it to stay around 73. > OFZs and ruble rates: We expect the OFZ curve to continue flattening. A further 50 bp rate hike from the CBR this Friday would keep it in the vanguard of rate-hikers among EM central banks and reinforce the view that inflation in Russia will return to the target next year. > EM bonds: We do not think EM bonds will weaken significantly over the next couple of weeks amid what we expect to be a continued uptrend in UST yields. We believe the spreads between EM bonds and US Treasuries will remain virtually flat, after narrowing slightly over the previous two weeks. > FSU sovereign Eurobonds: We think Belarus has the largest potential to outperform in our space. The key thing to watch is a new credit line from Russia - currently being discussed - to compensate for the impact from Russia's tax maneuver. In August, Lukashenko also called for another credit line around $1 bln. When agreement on loans reached, it should be a positive driver for Belarus Eurobonds, which is not priced in quotes, but timing is unclear.> FSU corporate and banking Eurobonds: Over the last two weeks, there was not really a clear trend in the Russian corporate Eurobond space, though bids outweighed offers in certain issues. > FSU primary Eurobond market: As we had expected, Russia's primary market for bond placements has come to life in September.