Market Graphic: What drives Russian bond spreads?

Four variables account for the majority of movement in Russian bond spreads over the last five years, according to a model developed by VTB Capital Research

Set against the recent backdrop of significant global financial market volatility, a simple four-variable model can be identified to assess the key drivers of Russian bonds spreads, which has been proxied by the JPMorgan EMBI Russian index (see chart 1). This model has been constructed using monthly data going back to January 2003 and has shown a generalised decline in spreads, largely reflecting a trend improvement in a number of fundamental economic factors (see chart 2). Over this period, the