- Bonds gain for 2nd day sending yields to lowest since Jan. 8
- Ruble slips after biggest advance in a month on Wednesday
Russian stocks rose, extending the longest stretch of gains since November, and bonds advanced as crude’s rebound above $35 a barrel boosted asset prices in the world’s biggest energy exporter.
The benchmark Micex Index advanced for a fifth day, climbing 2.1 percent to 1,807.21, the highest closing level since Nov. 26, with shares of Lukoil PJSC gaining 4 percent. The yield on five-year notes fell 18 basis points to 10.11 percent, the lowest level since Jan. 8.
Russia’s markets have been buoyed by optimism oil producers are taking steps to bolster the commodity, which contributes almost 50 percent of Russia’s budget revenue along with natural gas. Oil surged following Iran’s initial support for a proposal by Saudi Arabia and Russia to freeze production, before reversing after release of a U.S. inventory report. The ruble gained the most in a month on Wednesday as the government sold out an auction of its longest-maturity OFZ bonds in three years.
"It’s too early to call this a rally on fundamentals -- oil is still too cheap for that," said Vladimir Miklashevsky, a strategist for Russia at Danske Bank A/S in Helsinki. "But there is some appetite for Russian risk and some people try to time the market and catch the bottom."
While bonds and stocks gained, the ruble traded 1.7 weaker at 76.336 per dollar by 7:30 p.m. on Thursday in Moscow after a 3.8 percent advance on Wednesday. The price of Brent oil in ruble terms rose 0.9 percent to 2,610.
"The ruble has been outperforming lately, so a small correction relative to oil is possible," Danske’s Miklashevsky said.
Brent crude fell 0.9 percent, reversing earlier gains after the release of data showing U.S. crude inventories rose to an 86-year high, to $34.18 a barrel in London. Crude climbed 7.2 percent on Wednesday. Goldman Sachs Group Inc. said the Russian currency may be one of the biggest beneficiaries if Brent strengthens to $54 per barrel in the next 12 months and the ruble has the potential to appreciate to 66 per dollar, according to Kamakshya Trivedi, Goldman’s chief emerging markets macro strategist.
Shares of Sberbank PJSC gained 3.5 percent to the highest this year while natural gas producer Novatek PJSC added 3.4 percent.