Russia’s Eurobonds rose, heading for the highest close in more than two months, as investors bought higher-yielding assets after Japan’s announcement of unprecedented monetary easing.
The yield on benchmark Russia Eurobonds due April 2042 plunged 15 basis points, the most on record, on April 4, when the Bank of Japan said it will buy 7.5 trillion yen ($75 billion) of bonds a month. The rate fell four basis points today to 4.45 percent, the lowest since Jan. 29, narrowing the premium investors demand to hold the debt over similar maturity U.S. Treasuries to 146 basis points from 172 basis points on April 3.
“Japanese quantitative easing should lead to an additional inflow of liquidity,” Yury Nefedov, a fixed-income trader at Renaissance Capital in Moscow, said by phone. “The Fed and Japan are increasing liquidity on the market quite strongly, and to find yield you have to go to emerging markets, including Russia.”
The U.S. Federal Open Market Committee, led by Chairman Ben S. Bernanke, is continuing with $85 billion in monthly bond purchases until the labor-market outlook has “improved substantially,” according to minutes released this week. A report tomorrow is forecast to show U.S. retail sales stagnated in March after advancing 1.1 percent in February.
Russia’s Finance Ministry sold its entire allotment of bonds at primary auctions yesterday, the first time this year, placing 35 billion rubles of OFZ securities. The ruble was little changed today against the central bank’s target basket of dollars and euros at 35.1294 by 7 p.m. in Moscow after three days of gains. The ruble strengthened 0.2 percent against the dollar to 30.8100 for the sixth straight day of advances.
Yields on bonds of non-investment grade Russian banks also fell. The rate on ZAO Russian Standard Bank’s securities due July 2017 fell five basis points, or 0.05 percentage point, to a record 6.94 percent. The yield on Eurobonds of ZAO TCS Bank due September 2015 dropped 16 basis points to an all-time low of 6.93 percent.
The Eurobonds of smaller Russian banks show “totally insane” returns thanks to the combination of high coupon, low duration and low amount outstanding, RenCap’s Nefedov said.