Ruble Rebounds From Record; Bonds Gain as Second Auction Axed

The ruble strengthened for the first time in three days as investors wagered its slump was overdone and Interfax said the Finance Ministry won’t sell the Russian currency during periods of turbulence. Bonds advanced after the ministry canceled its second auction in a row.

The ruble climbed 0.9 percent against Bank Rossii’s basket of dollars and euros to 40.6873 by 6 p.m. in Moscow, when the central bank stops its market operations. It touched a record-low 41.1779 earlier. The yield on government ruble bonds due February 2027 fell 10 basis points, or 0.10 percentage point, to 8.24 percent.

The Finance Ministry won’t buy foreign currency for its wealth fund at the same time the central bank is intervening to smooth exchange-rate fluctuations, Interfax reported, citing Deputy Minister Alexey Moiseev. The bond auction was scrapped this week after an analysis of market conditions, the ministry said on its website.

“We closed the undeserved gap,” Sergey Fishgoyt, deputy head of foreign-exchange trading at Otkritie Capital, said in e-mailed comments. “The trigger was the news that the Finance Ministry won’t buy foreign currency while the central bank’s selling it.”

The ruble has retreated 6.5 percent this year against the dollar, the worst performance among 24 emerging-market currencies tracked by Bloomberg after Argentina’s peso.

Auctions Canceled

The ministry has until April 1 to convert rubles into foreign currency, which is then used to buy assets for Russia’s Reserve Fund, Moiseev was cited as saying. It may use the previous arrangement of direct conversion with the central bank, he said, according to Interfax.

The Finance Ministry canceled its scheduled bond auction last week after selling less than 25 percent of the securities on offer in January. While the ruble’s retreat has curbed appetite for Russia’s bonds, budget revenue is safe because a weaker local currency increases flows from oil and gas exports which are priced in foreign currencies, Capital Economics Ltd. said last week.

“An auction cancellation is a good sign,” Fedor Bizikov, a money manager at GHP Group in Moscow, said in e-mailed comments. It shows “the market the Finance Ministry is all right with cash and has no need to borrow at any price,” 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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