Debt Markets Today - February 14, 2022. Russian January Budget Data, Geopolitical Weekly Outlook, CBR Decision Review

CIS EUROBOND MARKETOn Friday, the announcement that the Fed's Board of Governors would hold a closed meeting today pressured EM external debt, with Russia's 10y EM sovereign peers losing 0.2-0.6 pp. The Russia 29 underperformed with a 1.2 pp loss, as the Normandy format meeting on Thursday failed to deliver positive developments. The Russia 47 lost 3.2 pp and the Russia 35 1.2 pp.GOVERNMENT DEBTOn Friday, the OFZ market was hit by a number of negative factors ranging from surging US Treasury yields to the CBR's hints at multiple further rate hikes and a depreciating ruble. However, the main driver of the declines, in our view, was the general tone of the CBR's rhetoric (see our CBR Review), which became even more hawkish than at the October-December meetings (when it was already about as hawkish as it had ever been). The CBR's forecast for the average key rate in 2022 was raised to 9-11% from 7.3-8.3% at the last core meeting in October. This implies that if inflation remains near the upper end of the CBR's expectations the key rate could reach as high as 12% this year. The midpoint of the forecast would entail another 100 bp hike in March, then no changes through 3Q22, and then two 25 bp cuts in October and December.STORIES> Russian federal budget posts R125 bln surplus in January> Market reaction to US rhetoric, other events to watch this week> CBR Review: Two 100 bp hikes in a row, one more likely to follow in March