Debt Markets Today - June 15, 2021. CBR Review, Fed Preview, Belarusian Inflation

CIS EUROBOND MARKETThis week began with the US 10y Treasury yield advancing 4 bps to 1.50% yesterday, a move likely owing to anticipation of this week's Fed decision. The market does not expect a significant shift in rhetoric, although it is possible that the press conference will see more signals about when the committee thinks it might be appropriate to begin discussing reducing asset purchases. GOVERNMENT DEBTThe CBR hiked the key rate 50 bps to 5.50% on Friday and hinted that further hikes were likely at upcoming meetings. While the outcome of Friday's meeting was largely in line with market expectations, most OFZs closed in positive territory. Issues longer than 5y were traded more heavily than others and closed 6-10 bps lower in yield. The 10y OFZ 26218 (September 2031), for example, closed at 7.20%, the lowest since the start of June. We see a number of reasons for this. First, investors saw the CBR's hawkish rhetoric as helping to cool down the long-term inflation risks (CBR Governor Elvira Nabiullina noted that even a 100 bp cut had been considered on Friday). It is also likely that some market participants feared that the CBR would act less decisively or that it could revise its neutral-rate estimate higher from 5-6%. Nabiullina dispelled such concerns, saying that the CBR is sticking to its current neutral-rate range. On top of that, Thursday's rally in benchmark assets and EM local debt could also have helped the curves tighten on Friday. As a result, OFZs were among the top performers in the EM space (10y local currency-denominated bonds finished anywhere from 10 bps lower to 10 bps higher in yield).STORIES> CBR Review: Hawkish 50 bp hike delivered> Federal Reserve Preview: Transitory inflation rhetoric to stay, only slightly hawkish turn> Inflation in Belarus accelerates to 9.4% y-o-y in May