Belarus Bonds Rebound From Record Lows as Devaluation Expected

Belarus’s dollar-denominated bonds rebounded from yesterday’s plunge, which pushed yields to record highs on currency-devaluation concern.

The country’s dollar bonds due in 2018 rose 1.2 percent to 88.825 cents on the dollar, the biggest jump since they were sold in January, pushing the yield down 25 basis points to 11.978 percent as of 10:46 a.m. in London, according to prices on Bloomberg. Belarus dollar bonds maturing in 2015 gained 0.9 percent, trimming the yield 25 basis points to 12.126 percent. It was the first day of gains in the past three days.

Yields reached record highs yesterday on concern the country may be forced to devalue and will struggle to pay debts after foreign reserves decreased 33 percent to $2.9 billion in December from a year earlier, according to Bloomberg-compiled data. Belarus’s current-account deficit was equivalent to 15.6 percent of the economy in 2010. Belarus asked Russia and former Soviet partners for loans of $3 billion, Russian Finance Minister Alexei Kudrin said March 15. The central bank eased restrictions on banks’ foreign-currency dealings yesterday.

“We think that something must be in the pipeline in terms of privatization,” Dmitry Gourov, a Vienna-based UniCredit analyst, wrote in a research report today. Belarus may have to devalue its ruble by 20 percent “in the coming weeks,” UniCredit said.

The Belarusian ruble weakened 0.2 percent to 3,031 per dollar, bringing losses in the past two days to 0.4 percent, the biggest back-to-back retreat since Jan. 11 in intraday trading.

New Rules

By comparison, Greece’s current-account deficit reached 15.3 percent of GDP in the third quarter of 2008, and began 2010 at 12.2 percent before the country had to turn to the European Union for a rescue loan.

The central bank of Belarus lifted its 30-day reserve requirement for bank purchases of foreign currency to help lenders cope with currency demand, according to a statement on the regulator’s website yesterday.

The new rules, which will go into effect on April 1, will allow banks to buy foreign currency one day after reserves in Belorussian rubles are formed, the Natsionalnyi Bank Respubliki Belarus said in the capital Minsk.

The central bank devalued its currency by about a fifth January 2009.

The Natsionalnyi Bank Respubliki Belarus, the central bank, said on March 15 that it has no plans for a “sharp” currency devaluation. The Belarusian ruble will be allowed to fluctuate within 8 percent of 1,057.04 rubles, the value of its target basket at the start of the year, the bank said March 15. The basket is divided equally into dollars, euros and Russian rubles.

To contact the reporters on this story: Jason Webb in London at jwebb25@bloomberg.net

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