Ruble Weakens to 2-Month Low as Russia Bonds Drop on Fed Concern

The ruble and Russia’s bonds headed for the weakest level in two months as better-than-forecast U.S. data fueled bets the Federal Reserve will move to pare stimulus, curbing appetite for emerging-market assets.

The ruble dropped 0.3 percent to 37.6914 against Bank Rossii’s target dollar-euro basket by 6 p.m. in Moscow, the lowest level on a closing basis since Sept. 10. The yield on government bonds due February 2027 rose three basis points, or 0.03 percentage point, to 7.78 percent.

Emerging-market currencies weakened as investors weighed the timing for reduced bond purchases by the Fed. American payrolls added almost twice as many workers as projected in October, data showed on Nov. 8. Russia-focused bond funds had $19 million in outflows in the week to Nov. 6, OAO Gazprombank said Nov. 8, citing EPFR Global data.

“Friday’s numbers exposed the risks of intensifying capital outflow from several emerging countries, triggering another round of flight from their currencies,” OAO Rosbank (ROSB) analysts Evgeny Koshelev and Alexander Sychev said in an e-mailed note

The ruble weakened 0.1 percent against the dollar to 32.6755 and traded down 0.5 percent versus the euro at 43.8160. Oil, Russia’s chief export earner, advanced 0.4 percent to $105.58 a barrel in London, extending a 1.6 percent gain Nov. 8.

The yield on 10-year U.S. Treasury bonds rose 15 basis points, the most since July 5, to 2.75 percent on Nov. 8. The U.S. market is closed today for Veterans Day.

“In the past 12 months Russian traders as a rule of thumb used 500 basis points as a fair spread between Treasuries and the 2027 bond,” Dmitry Dorofeev, a strategist at BCS Financial Group in Moscow, said by e-mail.

Given the development of the local debt market and the central bank’s introduction of new refinancing instruments, this premium should decline, making the 7.75 percent to 7.80 percent range attractive for buying, Dorofeev added.

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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