Ruble Bond Yields Climb to Four-Month High on Cyprus, Oil Plunge

The ruble fell the most in two weeks against the central bank’s target basket and government bond yields reached the highest since November as a levy on Cyprus’s bank savings threatened to throw Europe back into crisis.

Russian companies and individuals have $31 billion of deposits in Cyprus, according to Moody’s Investors Service. Oil in New York tumbled from a three-week high after euro-area finance ministers in the reached an agreement on March 16 forcing depositors in Cypriot banks to share in the cost of the latest bailout. The oil and gas industry provides about 50 percent of Russia’s budget revenue.

“At least at the initial stage ruble assets are more likely to suffer because they are more sensitive to global risk sentiment, rather than because of exposure to Cyprus,” Vladimir Kolychev, head of research at Societe Generale (GLE)’s SA Moscow-based OAO Rosbank (ROSB) unit, said by e-mail.

The Russian currency weakened 0.3 percent against the central bank’s target basket of dollars and euros to 34.9743 by 3:03 p.m. in Moscow. The yield on OFZ bonds due February 2027 increased six basis points, or 0.06 percentage point, to 7.51 percent, the highest level since Nov. 20.

Oil dropped as much as 1.4 percent to $92.14 a barrel in electronic trading on the New York Mercantile Exchange. The ruble dropped as much as 0.9 percent against the dollar to 30.9185 before trading at 30.8695, heading for the lowest closing level since Dec. 17.

Russian President Vladimir Putin criticized the penalty imposed on Cyprus bank deposits, saying at a government meeting today that the decision “if it is adopted, will be unfair, unprofessional and dangerous,” according to a statement posted on the Kremlin website.

To contact the reporter on this story: Vladimir Kuznetsov in Moscow at vkuznetsov2@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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