Fixed Income. CIS Sovereign Pulse - May 22, 2018

Long-term US rates were consolidating last week, but the persistent feeling that they are inexorably rising and souring sentiment toward EM assets created a negative backdrop for EM Eurobonds. CIS paper had a mixed week. The worst performers over recent weeks - single-B names such as Tajikistan, Armenia and Ukraine - fared the best, while Belarusian and Azeri sovereigns unperformed, despite the latter benefiting from the elevated oil price. While Russia sovereigns traded in line with the market, Kazakh sovereigns saw their spreads shrink slightly.In Russia, the focus was on the formation of the new government and the president's traditional May decree, which is likely to set the tone for the country's fiscal policy over the coming years. Russia, Ukraine and Armenia published 1Q18 GDP numbers. Armenia remained in the spotlight, as Prime Minister Nikol Pashinyan formed a new government, which will present its program on June 7 and prepare the country for snap general elections later this year. We continue to underweight long durations and remain cautious on Ukraine, as we would like to see greater clarity on its cooperation with the IMF. For investors looking to add risk, we consider shorter-dated Armenian, Belarusian, Georgian and Azeri paper as good options.