Debt Markets Today - June 28, 2021. Impact of EU Sanctions on Belarus, Kazakhstan Returns to Ruble Debt Market, Ukraine May Economic Update

CIS EUROBOND MARKETOn Friday, Russian sovereign and corporate Eurobonds had a flaccid session, with the changes in price limited to just 0.2 pp. The focus of investors remained the CIS sovereign segment, where Armenian issues rose in price throughout the week, reflecting the ease in political uncertainty following the parliamentary elections on June 20. The Armenia 29 added another 0.3 pp on Friday, which made it the top performer in the market. The Belarus 31 was not far behind with a 0.2 pp gain, a modest recovery following the 3-5 pp plunge in quotes across the Belarusian curve early last week as investors awaited the new round of sanctions. We think Belarusian sovereign Eurobonds could trim their recent losses in the near term, as we think the market was positioned for harsher sanctions.GOVERNMENT DEBTLocal EM debt markets were generally range-bound on Friday. In Russia, the focus was on the June inflation expectations data. The inflation expectations of the population increased by 0.6 pp to 11.9%, the highest in four years, and the expectations among businesses also continued to pick up, driven by cost pressures. In fact businesses' estimate of the change in costs was the highest since 2002, while retailers' forecast for the increase in prices over the coming three months rose from 4.3% to 6.1% y-o-y. In our view, this data helps build the case for the CBR to hike rates by 50 bps in July, though the regulator could even consider a larger hike, similarly to its last meeting in June.STORIES> Economic growth in Ukraine slows in May> Kazakhstan returns to ruble debt market; ruble offerings from other CIS countries to follow> Belarus update: EU sanctions to hit external trade balance, budget