Russia Eurobond Yields Hit 17-Month High as Ruble Slumps on Oil

Russian Eurobond yields jumped to the highest in more than a year and the ruble weakened as oil fell on concern economic growth in China may be threatened by cash constraints.

The ruble dropped 0.4 percent against the dollar to 32.9225 by 11:50 a.m. in Moscow, the eighth worst performance among 24 emerging-market currencies tracked by Bloomberg. The currency lost 0.2 percent versus the central bank’s dollar-euro basket to 37.5341. The yield on Russia’s Eurobonds due March 2030 climbed 16 basis points to 4.48 percent, the highest since January 2012.

Goldman Sachs Group Inc. and China International Capital Corp. cut their 2013 economic growth forecasts for China to 7.4 percent as a cash squeeze in the banking system risks exacerbating an economic slowdown. Brent oil tumbled 0.6 percent to $100.36 per barrel, falling as low as $99.82 today. Crude and natural gas provide about 50 percent of Russia’s state revenue.

“The situation with the Chinese slowdown is driving oil below $100 today,” Igor Akinshin, a foreign exchange trader at Alfa Bank, said by phone from Moscow. “There are no drivers for the ruble, the weakening trend persists, people are selling the currency.”

The Russian currency and debt joined a global market rout last week after Fed Chairman Ben S. Bernanke said the regulator may start reducing bond purchases that have fueled asset-price gains, and end the program in 2014 should risks to the U.S. economy abate.

Russia’s central bank started buying rubles on May 29 to slow its slide. Bank Rossii, which reports currency intervention data with a delay and steps up interventions if the ruble weakens beyond certain levels, spent the equivalent of 6.54 billion rubles ($199 million) of foreign currency on June 20, it said today.

Rising Yields

The yield on benchmark ruble bonds due 2027 jumped 20 basis points, or 0.2 percentage point, to 8.25 percent, the highest since September.

The Finance Ministry is set to announce today the amount and the maturity of ruble bonds it plans to auction June 26. The government plans to sell 40 billion rubles ($1.2 billion) of three-year OFZs in the third quarter, the most for that maturity since the first three months of 2012, according Finance Ministry statements last week. Russia is targeting a total of 270 billion rubles of OFZs in the third quarter.

Investors are pulling money from emerging markets at the fastest pace in two years. More than $19 billion left funds investing in developing-nation assets in the three weeks to June 12, the most since 2011, according to EPFR Global.

To contact the reporter on this story: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

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

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