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Russian Bonds Gain on Sellout 10-Year Auction; Ruble Weakens

Russia’s government notes gained after the Finance Ministry sold all 10-year bonds offered at an auction today.

The Finance Ministry sold 10 billion rubles ($303 million) of OFZs due January 2023 at a weighted-average yield of 7.38 percent, it said on its website. The proposed yield was 7.35 percent to 7.40 percent with total demand at the top end of the range totaling 15 billion rubles.

There was probably “good demand from foreigners,” Anton Nikitin, analyst at VTB Capital, said by e-mail. The ministry will offer 10 billion rubles in OFZ bonds due May 2016 at 6.25 percent to 6.30 percent expected yield later today.

The yield on benchmark OFZ bonds due February 2027 fell one basis point, or 0.01 percentage point, to 7.73 percent at 3:02 p.m. in Moscow. The yield on the 2023 bond dropped one basis point to 7.37 percent.

The ruble depreciated 0.1 percent to 37.9218 against Bank Rossii’s dollar-euro basket. The ruble weakened 0.1 percent against the dollar to 33.0060. Brent crude fell for a fourth day, losing 0.6 percent $107.58 a barrel. JPMorgan Chase & Co.’s Emerging Markets Currency index declined by 0.1 percent to 90.097.

Rates, Fed

While Bank Rossii policy makers meet Aug. 9 to discuss interest rates, Federal Reserve Bank of Chicago President Charles Evans said yesterday he “would clearly not” rule out a decision to begin curbing bond purchases in September.

“Emerging-markets currencies are under pressure on renewed fears of the Fed tapering and the ruble is no exception,” Vladimir Kolychev, an economist and strategist at OAO Rosbank (ROSB) in Moscow, said by e-mail.

Bank Rossii sold the equivalent of 6.6 billion rubles in foreign currency on Aug. 5, bringing the total amount spent since interventions began on May 29 to 281.5 billion rubles, central bank data shows.

According to central bank data, about three fourths of daily intervention volumes are targeted selling, and the rest are so-called non-targeted interventions, conducted to smooth out excessive ruble volatility. As soon as the volume of non-targeted interventions reaches $450 million, the central bank moves the currency corridor by 5 kopeks. In July, it moved it three times to the current 31.85-38.85, according to a statement on Bank Rossii’s website.

“Should the pressure persist, the basket could continue to grind higher at a snail’s pace along with the 5-kopeks upward shifts in the central bank’s floating band,” Kolychev said. The next shift to 31.90-38.90 is possible as soon as today, he said.

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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