Regional Fixed Income Market Watch
Monetary policy: Regional central banks tightened monetary policy further in Dec-21 amid inflationary pressures. Russia’s central bank raised the key rate by 100bps to 8.5%, Ukraine by 50bps to 9.0%, Armenia by 50bps to 7.75%, Georgia by 50bps to 10.5% and Azerbaijan by 25bps to 7.25%. On the contrary, Turkish central bank continued controversial monetary easing and cut the key rate by 100bps to 14.0% despite high inflation. Other regional central banks maintained rates unchanged in December.
FX market: During Dec-21, all regional currencies performed relatively well against US dollar after depreciating in previous month. Armenian dram (AMD) was the best performer gaining 1.5% m/m vs dollar, followed by Georgian lari (GEL) strengthening by 1.2%. Turkish lira (TRY) also stabilized in December after losing more than 40% in previous month. Russian rouble (RUB) and Belarusian rouble (BYN) both weakened slightly by 0.8%, followed by Ukrainian hryvnia (UAH) which lost 0.4%.
Georgia money market: In Dec-21, GEL 143.5mn treasury notes and GEL 50mn treasury bills were sold. Weighted average interest rate on 5-year instrument was 9.865%, on 2-year notes was 9.078%, on 1-year instrument was 9.963%, and it stood at 9.324% for 6-month instruments. Notably, non-residents’ treasury holdings rebounded in Nov-21, up 21.7% m/m to GEL 501.8mn, after falling by 21.5% m/m in Oct-21. As a result, the share of non-residents in total outstanding holdings increased by 1.5ppts m/m to 9.4% in Nov-21.
Regional sovereign Eurobond market: Regional political tensions and virus spread continued to weigh on regional Eurobonds in Dec-21, however impact was milder than in previous month. UKRAINE 26 remained the worst performer of the month, with the yield widening by 130.0bps, while the price declined by 4.9% m/m (please note that bond yields and prices move in opposite direction). On a monthly basis, yields widened also on BELARUS 27 and TURKEY 26 up 47.3bps and 45.8bps, respectively, while prices declined by 2.0% and 1.6%. RUSSIA 23 also performed poorly, with the yield increasing by 22.0bps m/m. UZBEK 24 was the best performer among peers, with yield down 24.0bps m/m, followed by GEORGIA 26 with yield down 20.0bps in the same period.
Georgian corporate Eurobond market: Among the Georgian corporate issuers, Silknet 24 was the best performer in Dec-21, with yield declining by 11.7bps m/m. Yields on BOG 23, BOG perp and GRAIL 28 also declined, down 11.4bps, 6.6bps and 1.2bps, respectively. GEOCAP 24 was the worst performer with yield widening by 26.1bps m/m, followed by TBC 24 (+18.9bps) in Dec-21.