Economics & Strategy – Fixed-Income Strategy: Third

Unranked last year, Pavel Pikulev returns to the roster in third place. The Deutsche Bank strategist is pragmatic about recent moves by Belgium’s Euroclear and Luxembourg’s Clearstream Banking to provide clearing and settlement services for Obligatsyi Federal’novo Zaima (ruble-denominated sovereign Russian bonds). “We have never seen OFZ market liberalization as a sole basis for trade ideas,” he says. “Opening the local bond market for global clearing was like providing investors with a spoon — but if investors hadn’t liked the contents of the soup bowl, this wouldn’t have made them eat.” Given Russia’s relatively high interest rates, positive current account and favorable inflation — along with soaring global demand for emerging-markets debt — “investors found our soup delicious,” he adds. But probably not for long. Pikulev believes that inflation will decelerate, thus opening the door to monetary easing that will lead to lower OFZ yields. However, “corporate bonds have been lagging behind the internationally driven OFZ market because funding costs for local banks, which dominate the corporate market, are still not competitive,” he explains. “The picture is likely to change soon, and corporate bonds should catch up.” He recommends triple-B-rated or better quasisovereign names with five- to seven-year maturities. “Pavel produces excellent research with a thorough focus on local currency, rates and fixed income,” asserts one backer. “His comments on monetary policy and economic developments that impact the market are extremely valuable.” — Thomas W. Johnson