Highlights • Georgia’s economy increased 1.5% in 1Q20 before contracting 16.6% in April 2020, due to strict lockdown measures. Belarus economy was down by a mere 0.3% in 1Q20, while the economy contracted by 1.3% in 4M20. Real growth in Kazakhstan stood at 2.7% in 1Q20. Economic data on other regional countries is not yet available. • As of May 2020, monetary policy rate is at 5.00% in Armenia (-25bps), at 5.50% in Russia (-50bps), at 7.25% in Azerbaijan (unchanged), at 8.75% in Belarus (-25bps), at 8.50% in Georgia (-50bps), at 9.5% in Kazakhstan (unchanged), at 8.75% in Turkey (-100bps) and at 8.00% in Ukraine (-200bps). • After the unprecedented outflows from EM markets in March-April 2020, non-resident flows have returned to positive levels in May according to Institute of International Finance. The EM bond markets were helped by the massive liquidity injection from the major central banks (FED, ECB, BOJ), which first lifted global equity markets and now are slowly reaching EM. • With improved global sentiment, exchange rates in most of the regional countries stabilised. GEL strengthened against USD by 1.2% during May, while RUB appreciated by 4.9% followed by KZT +3.9%, TRY +2.5%, BYN +1.9%, AMD +0.9%, while Ukraine’s UAH remained mostly flat (+0.1%). • Stabilization in developed markets helped yields of the regional Eurobonds. UKRAINE 21 (6.8% YTM; 101.1 price) outperformed the regional Eurobonds, with the yield dropping by 343.5bps in May. BELARUS 23 (5.2% YTM; 104.1 price) followed, with the yield down 238.1bps in the same period. GEORGIA 21 (3.6% YTM; 102.7 price) also performed strongly, with the YTM decreasing by 219.2bps. ARMENIA 25 (3.7% YTM; 114.9 price), UZBEK 24 (3.0% YTM; 106.1 price) and AZERB 24 (3.2% YTM; 105.5 price) narrowed by 174.0bps, 154.2bps and126.6bps, respectively. TURKEY 21 (4.0% YTM; 101.3 price) tightened by 98.9bps. RUSSIA 23 (1.5% YTM; 110.9 price) and KAZAKH 24 (1.7% YTM; 109.3 price) whose yields have remained relatively stable narrowed by 82.0bps and 57.9bps, respectively. • Among Georgian placements, quasi-government GOGC 21 (7.9% YTM; 98.9 price) who has been one of the worst performers in March-April 2020, has partially trimmed recent losses, with the yield declining by 278.2bps in May. GRAIL 22 (7.3% YTM; 100.9 price) narrowed by 131.4bps from the 1 May level. Among the Georgian banks, TBC 24 (6.0% YTM; 99.2 price) tightened by 139.5bps in May, while YTM on BOG 23 (7.4% YTM; 96.1 price) declined by 55.7bps. GEOCAP 24 has remained mostly flat in May, with the yield up by 6.7bps. In perpetual instruments, yield on BOG’s bond narrowed by 7.5bps, while TBC perp. YTM increased by 13.6bps in May. SILKNET 24 (10.6% YTM; 101.1 price) outperformed other Georgian placements, with the yield dropping by 342.9bps to 10.6% in May. Notably, SILKNET 24 is trading at a premium to par for the first time since early March.
Please see the full report for detailed coverage of the fixed income markets of Georgia, Armenia, Azerbaijan, Belarus, Kazakhstan, Ukraine, Russia, Turkey, Uzbekistan.
