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Russia Bond Yields Rise to 3-Month High on Rates; Ruble Steady

Nov. 28 (Bloomberg) -- Russian government bond yields rose to a three-month high as economists forecast rates won’t be cut this year amid emerging-market fund outflows.

The yield on the government’s January 2028 ruble bond climbed 10 basis points, or 0.10 percentage point, to 8.17 percent by 6 p.m. in Moscow, the highest since Aug. 28 on a closing basis. The ruble was steady against the central bank’s dollar-euro basket.

While Russia-dedicated fixed-income funds have had $744 million in total outflows since the start of the year, $3.3 billion has been withdrawn since the beginning of June, according to calculations by OAO Gazprombank analysts, based on EPFR Global data. Economists now predict no change in the central bank’s key rate this year, compared with forecasts for a quarter-point cut as recently as last month, according to the median estimate of 20 analysts in a Bloomberg survey.

“The main reasons for falling prices and rising yields are external,” Yakov Yakovlev, an analyst at OAO Gazprombank in Moscow, said in e-mailed comments. “The Russian market is moving along with other emerging markets.”

The ruble traded little changed at 38.5132 against the basket after sliding 1.4 percent in the three previous days. That drop took it to the lowest level since August 2009.

The ruble may weaken slightly when the monthly tax period ends, Interfax reported today, citing Economy Minister Alexey Ulyukayev. The currency’s movements are in line with the central bank’s policy shift toward targeting inflation and letting the currency float freely from 2015, the former central banker said, according to the news service. The regular tax period in Russia ends today with corporate income duties.

Tax Period

“As the central bank continues to shift the basket’s trading band, this fulfills expectations for further weakening,” Vladimir Miklashevsky, a strategist at Danske Bank A/S in Helsinki, said in e-mailed comments.

The regulator has reduced the level of cumulative interventions required for it to ease its defense of the ruble as it moves to a free-float. Bank Rossii raised the corridor in which it buys or sells currency by 5 kopeks to 32.65-39.65 rubles versus the basket on Nov. 26, the sixth increase this month.

The ruble depreciated 0.1 percent against the euro to 45.0650 and gained 0.1 percent per dollar to 33.1460. An index of the 20 most actively-traded emerging-market currencies was little changed at 92.5364, data compiled by Bloomberg show.

Foreign investors have the second biggest overweight position in Russian local currency debt compared with other countries, Morgan Stanley analysts said in a Nov. 27 note.

Ruble weakness, delayed central-bank rate cuts and weak appetite from emerging-market funds leave the market vulnerable in the near term, Morgan Stanley analysts led by Rashique Rahman said in a separate note the same day.

To contact the reporter on this story: Vladimir Kuznetsov in Moscow at

To contact the editor responsible for this story: Wojciech Moskwa at

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