Russian Bonds Extend Record-Low Yield After Putin’s Election Win

Russia’s $3.5 billion of bonds due 2020 extended their advance for a third day, pushing the yield to the lowest in almost two years after Vladimir Putin won his bid to return to the country’s presidency.

The yield on the debt fell two basis points, or 0.02 percentage point, to 3.921 percent, the lowest on a closing basis since they first traded in April 2010. It has declined 59 basis points since the beginning of this year. Ruble-denominated local notes due August 2016 yielded five basis points less than on March 2, at 7.35 percent.

Putin won another six years in the Kremlin with 63.8 percent of the votes, according to preliminary results with more than 99 percent of all ballots counted. Communist leader Gennady Zyuganov came second with 17.2 percent, and billionaire Mikhail Prokhorov followed him with 7.8 percent.

“Sentiment is still good after the election results,” Roman Dmitriev, who oversees about $150 million in Russian bonds at OOO Spectr Invest in Moscow, said by e-mail. “Liquidity conditions are improving.”

The overnight MosPrime (MOSKON) rate banks say they charge to lend to one another dropped nine basis points to 4.69 percent. The three-month rate declined five basis points to 6.73 percent.

“I think the rally in OFZs will continue,” Konstantin Svyatny, head of fixed income at Investment Company Kapital in Moscow, said by e-mail. “There’s very good demand from non- residents, as the last auction of 15-year bonds confirmed. In addition, after the elections Russia’s sovereign rating may be raised, which could also contribute to higher prices.”

Bond Sales

The Finance Ministry sold 9.8 billion rubles ($334 million) of 15-year OFZ bonds Feb. 22, its longest-dated domestic notes offering since 2008. Investors submitted 50.5 billion rubles in bids, according to the ministry, more than five times the amount on offer.

The ruble weakened 0.2 percent to 29.34 per dollar at the 7 p.m. close in Moscow, paring its rise so far this year to 9.6 percent. The Russian currency lost 0.4 percent to 33.8125 per euro.

“The last two weeks of its strengthening have been overdone,” Andrey Gavrisev, deputy head of foreign exchange trading at Russian Standard Bank in Moscow, said by e-mail. “I can’t imagine what kind of event could make it strengthen further.”

The ruble was 0.3 percent weaker at 33.6026 against the central bank’s target dollar-euro basket, after appreciating 2 percent in the two weeks ended March 2.

To contact the reporter on this story: Jack Jordan in Moscow at jjordan22@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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