Russian Bond Yields Jump Most on Record in May as Ruble Weakens

Russia’s 2027 ruble bonds are heading for their worst month on record as investors shun riskier assets amid concern the U.S. Federal Reserve may pare back stimulus and on expectations May inflation won’t slow.

The yield on benchmark OFZ bonds due February 2027 rose 12 basis points, or 0.12 percentage point, to 7.56 percent by 2:02 p.m. in Moscow. That’s the highest since November 20 and takes the advance for May to 76 basis points, beating the increase in the same period of last year. The ruble weakened.

Developing-nation assets have slumped this month after Fed Chairman Ben S. Bernanke said last week the central bank could reduce the pace of bond purchases if there is a sustained improvement in growth. Russian consumer prices probably rose 7.2 percent in May from a year earlier, unchanged from April and more than 100 basis points above Bank Rossii’s target, according to a Bloomberg survey of 15 economists.

“There’s no safe haven any more,” Konstantin Artemov, who manages $500 million in fixed-income securities at Raiffeisen Capital in Moscow, said in e-mailed comments. “We are now dependent on the hurricanes on global exchanges.”

Emerging-market bond funds saw an outflow of $89 million in the week to May 29, the first reduction since June 2012, OAO Gazprombank said in an e-mailed report today, citing EPFR Global data.

The ruble retreated 0.4 percent against Bank Rossii’s dollar-euro basket to 36.2212 compared with 35.5441 at the end of last month. The Russian currency weakened 0.7 percent versus the dollar to 31.9450 from 31.1210 at the April 30 close.

Brent oil declined 0.7 percent to $101.53 per barrel, falling for the third day. Oil and natural-gas industries contribute about half of Russia’s budget revenue.

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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