The Daily Update - G20 and Putin's pulls

This year's G20 Summit concluded on Monday with ~85% of the world leaders departing from China's Hangzhou City and attention seeking North Korea launch three Rodong ballistic missiles which ended up in the Sea of Japan. Poor Mr. Obama neither had a red carpet rolled out on arrival, nor an appropriate staircase, this upset Mr. Trump no end, who tweeted his total disbelief at the ‘sign of such disrespect’. ‘First World problems’ comes to mind.

It seems there was a lot of chat at the Summit but very little outcome. For one, UK PM, May stood firm, not settling on any firm trade deals, despite Japan’s 15 page memo warning of Japanese businesses’ potential exit and Obama’s statement that although 'very special', the US’s relationship with the UK is not a priority. She did however swiftly look to Australia, India, Mexico, South Korea and Singapore as new trading partners; but doesn't want to 'reveal our hand prematurely'. She went on to meet Russian President Putin with an aim to put right the 'differences between' the UK and Russia, this conversation will need more than just one meet and greet though as 'there are some complex and serious areas of concern and issues to discuss', May said.

Not one to leave empty handed, President Putin, began negotiations on a joint Russian-Turkish investment fund to support huge lucrative infrastructure projects; expected to materialise by November. In addition, leaders in Turkey were very keen to start shipping Russia’s state-owned Gazprom’s gas to its border with Greece, with the aim to become a hub for EU consumers. Just yesterday,  we heard that the CEO of Gazprom and Turkey's Minister of Natural Energy and Natural Resources completed the necessary admin and permits were received to begin the projects as soon as possible.

Gazprom’s 8.625% 2034 issue was a star performer last month and continues to offer great value. Trading at a spread of 390bps over Treasuries, we calculate expected return on the bond is roughly 12%, suggesting a capital gain of ~19 points before it reaches 'fair value'. The bond continues to offer ample credit notch cushion and an attractive yield of 5.8%.