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Russia Cancels Government Bond Auction for 2nd Straight Week

Russian 100 Ruble Denomination Banknotes
The ruble has weakened 6.9 percent this year, the worst-performing among 24 emerging-market currencies tracked by Bloomberg after Argentina’s peso. Photographer: Andrey Rudakov/Bloomberg

Russia canceled a bond auction for the second consecutive week after an emerging-market rout sent yields on the nation’s bonds maturing in 2028 to record highs. The ruble climbed for the first time in three days.

The Finance Ministry scrapped the sale after “an analysis of market conditions,” according to a statement on its website. The government plans to offer 275 billion rubles ($7.8 billion) of securities this quarter, according to a timetable published at the end of last year.

Appetite for riskier developing-nation assets has soured amid signs of a slowdown in China as the Federal Reserve reduced monetary stimulus. The yield on the January 2028 bonds fell 10 basis points, or 0.10 percentage point, to 8.35 percent today, compared with a record high of 8.58 percent on Jan. 30.

“The Finance Ministry doesn’t want to send the signal that it’s comfortable borrowing at current rates,” Anton Nikitin, an analyst at VTB Capital in Moscow, said by e-mail.

The ruble has weakened 6.4 percent this year versus the dollar, the worst-performing among 24 emerging-market currencies tracked by Bloomberg after Argentina’s peso.

The Finance Ministry canceled its scheduled bond auction last week after selling less than 25 percent of the securities on offer this month. 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.

Increasing Revenue

“Evidently the ministry doesn’t particularly need the money at the start of the year,” Olga Sterina, an analyst at Uralsib Capital in Moscow, said by e-mail. The ruble’s drop “allows them to increase revenue to the federal budget,” she said.

Hungary’s debt management agency sold 80 billion forint ($350 million) of three-month T-bills at an auction today, more than the planned 60 billion forint. The average yield rose to 3.15 percent from 2.82 percent at the previous auction of similar-maturity notes last week.

The ruble appreciated 0.9 percent against the dollar to 35.1225 as of 5:38 p.m. in Moscow. It gained 0.8 percent to 47.5005 per euro, and added 0.9 percent to 40.6953 versus the central bank’s dual-currency target basket.

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