The ruble weakened and Russia’s long-maturity debt fell, driving the yield on Eurobonds due 2042 to the highest in almost seven months as sinking crude prices and weak European data curbed appetite for risky assets.
The yield on dollar notes due 2042 rose three basis points, or 0.03 percentage point, to 4.71 percent, the highest since July 24. The ruble weakened 0.7 percent to 30.3960 against the dollar and dropped 0.3 percent versus Bank Rossii’s target basket to 34.7734 by 7 p.m. in Moscow.
Crude oil, Russia’s main export earner, lost 2.5 percent to $92.81 a barrel, extending the biggest decline in three months. A composite index based on a survey of purchasing managers in euro-area services and manufacturing industries fell to 47.3 for February from 48.6 the month before, Markit Economics said. Economists forecast a reading of 49, according to a Bloomberg survey.
The oil drop is a “negative signal for the Russian bond market,” BCS Financial Group analysts led by Leonid Ignatiev wrote in an e-mailed note. It can “hurt the placement of currently marketed offerings as well as stoke the correctional mood on the secondary market,” they said.
Federal Reserve meeting minutes released yesterday sparked concern the U.S. may curtail stimulus, curbing demand for riskier, emerging-market assets.
Ruble notes due February 2027 fell, raising the yield 10 basis points to 7.21 percent, the highest since November. The yield on ruble-denominated government bonds maturing in June 2015 was unchanged at at record low 5.99 percent.
“Some people sell long bonds, buy something short instead and stay in it, other people just sell the longs,” Yury Nefedov, a fixed-income trader at Renaissance Capital said by phone. “It’s not the end of the world, just a correction. If you hit the bids, they stay on the screen. They don’t disappear or move 50 or 75 points lower.”
Sberbank CIB said it’s closing a recommendation to buy long-maturity OFZ bonds.
“At current levels there is no significant support for the sovereign yield,” analysts led by Alexander Kudrin said in an e-mailed note.
Russian exporters will use the weaker ruble as an opportunity to buy the local currency to pay taxes, according to analysts at OAO Rosbank.
“Market participants won’t hesitate taking advantage of newly opened opportunities,” Rosbank analysts led by Vladimir Kolychev said in an e-mailed note. The demand will keep the ruble close to 34.65 against the basket, the level where the central bank may intervene to curb gains, they said.
Bank Rossii purchased 3.42 billion rubles ($113 million) of foreign currency from Feb. 14 to Feb. 19, central bank data show.