Russia’s ruble bonds due 2027 fell for a second day, driving the yield to its biggest weekly increase since May amid lower prices for oil, the country’s main export earner.
The yield on the OFZ notes rose five basis points to 7.27 percent by 7 p.m. in Moscow, bringing the weekly increase to 21 basis points. That widened the premium investors demand to hold the bonds compared with debt due June 2015 to 126 basis points, or 1.26 percentage point, the most since July 12. The yield on the shorter maturity notes was unchanged in the week at 6 percent, one basis point short of a record low.
Brent crude has slumped 3.6 percent since this year’s peak of $118 on Feb. 14 and traded up 0.2 percent today at $113.78 a barrel. Oil and gas account for about half of Russia’s government revenue. The longer maturity OFZ is popular with investors and, being more liquid, it suffers most when markets weaken and oil drops, according to Leonid Ignatiev, head of fixed income research at BCS Financial Group.
“We’re seeing an outflow,” Ivan Guminov, a money manager at Ronin Trust, said by e-mail today. “Speculators are selling, and it’s exactly the 2027 bond they’re selling,”
Investors are also avoiding the notes after Euroclear Bank SA said Feb. 19 that delivery-versus-payment operations with the debt will be delayed “for a few days,” Ignatiev said by phone. Euroclear started direct settlement of government ruble debt this month.
“The curve will steepen further and reach its maximum peak in May,” he said. “From June, or July at worst, we’ll see a turnaround.”
Annual inflation will slow to 6.5 percent by the end of the year from 7.1 percent in January, economists surveyed by Bloomberg forecast.
Bond yields jumped and the ruble tumbled on Feb. 21 after the release of Federal Reserve meeting minutes sparked concern the U.S. may curtail stimulus, while a gauge of euro-area services and manufacturing industries missed estimates, curbing demand for riskier emerging-market assets.
The ruble strengthened 0.2 percent against the dollar to 30.4105, paring the loss for the week to 0.9%. The ruble added 0.3 percent to 34.7336 against Bank Rossii’s dollar-euro basket for a weekly loss of 0.1 percent.
The local currency got support from exporters who bought the ruble after two days of declines to pay mineral extraction taxes next week, said Igor Akinshin, a currency trader at Alfa Bank in Moscow.