Russian government bonds fell for the first time in nine days, with five-year yields rising from the lowest level since November. Stocks dropped.
Yields on five-year ruble-denominated notes, known as OFZs, climbed 14 basis points to 10.63 percent at 5:58 p.m. in Moscow. The benchmark equity gauge was poised for the biggest slide since May, while the ruble was little changed after capping its fourth weekly decline.
Bonds reversed earlier gains, which were spurred by speculation slowing inflation will give the central bank more leeway to cut interest rates. Local-currency sovereign notes returned 31 percent this year, the most among 31 emerging markets tracked by Bloomberg.
“There is some profit taking,” Vladimir Miklashevsky, a strategist at Danske Bank A/S in Helsinki, said by e-mail. Some “expectations of short-term ruble weakness due to dividend payments” may also be putting pressure on the bonds, he said.
The ruble is under pressure as Russian companies are due to pay out an estimated 875 billion rubles ($15 billion) in dividends this year through July.
Companies distributed about 278 billion rubles in dividends from their 2014 profits since annual payments began in May, with the rest of the payouts expected by the end of July, Sberbank CIB said on July 9. About $3.5 billion has been converted into foreign currencies to pay investors in depositary receipts and foreign institutional holders, it said.
The Bank of Russia, which has lowered its key interest rate by 550 basis points this year, may cut borrowing costs by a further 150 basis points by the end of 2015, according to analyst estimates compiled by Bloomberg. The ruble will probably weaken 1.7 percent through the end of the fourth quarter, according to data compiled by Bloomberg.
“Those who bet on further rate cuts by the central bank have already entered the asset,” Miklashevsky said.
The Micex Index slid 1.6 percent, with energy producers OAO Gazprom and OAO Lukoil leading declines as oil dropped. The dollar-denominated RTS lost 1.4 percent.
Out of 50 Micex shares, 34 traded above the 50-day moving average on July 17, the most since March 12, according to data compiled by Bloomberg.