Halister News

(Bloomberg) -- Trade is based on Bank of Russia’s “credible commitment” to attain 4% inflation by end-2017, UBS analysts led by Bhanu Baweja say in research note.

• UBS sees Russia cutting key rate by 200bps in 2017 to 8% if oil rises to $60/bbl, “RUB appreciates accordingly”
• Bank of Russia’s ambition to bring real rates to 2.5%-3%, hold higher real rates in the interim, should help belly of OFZ curve compress even if oil prices rise more slowly
• See scope for 5-year OFZ rates compresing by 75-100bps in 2017
• RUB will likely track oil prices as current account surplus is “still large enough to meet scheduled external rollover requirements”
• Recommend funding OFZ positions via CAD in order to reduce oil price risks