After a tough second quarter, analysts predict that central and eastern European debt will rebound in the second half of the year.
Fears of steep US rate rises led to a dip right across the emerging market universe in March and April. The JPMorgan emerging market debt index widened by about 60 basis points from the middle of March to the middle of April.
However, sentiment is now improving, and some new issues are coming to market. Russian debt looks particularly strong. On Friday May 13, the Russian government announced that it was paying off $15 billion in Paris Club debt. Moody's welcomed the move as another example of the country's "excellent debt management". Given that the country is already on a positive ratings outlook, another Moody's upgrade from the present Baa3 looks likely.
The Russian 30-year bond traded to an all-time high of 175bp over US Treasuries after the news was announced, down from 220bp in mid-April.
Russian corporates are also beginning to return to the primary markets. Financials in particular are doing deals – Sicacadembank issued a $100 million three-year bond on May 14, and Rosbank, Zenit Bank and Bank of Moscow were all preparing issues at the time of writing, as was Russian gas monopoly Gazprom.