Russian Bonds Advance as Ministry Readies Auction; Ruble Slides
Russia’s ruble bonds rose to the highest in almost two weeks as the government prepares a return to the primary market. The ruble weakened against the central bank’s target basket.
The yield on benchmark OFZs due February 2027 declined 12 basis points, or 0.12 percentage point, by 1:39 p.m. in Moscow to 7.80 percent, the lowest on a closing basis since June 19. The rate rose to 8.37 percent on June 24, the highest since July last year.
The Finance Ministry plans to sell 20 billion rubles ($605 million) of OFZs due January 2018 at an auction tomorrow after canceling a sale last week ahead of time because of market conditions. Russian assets plummeted amid an emerging-market rout sparked by Federal Reserve Chairman Ben S. Bernanke’s comments that the U.S. central bank may scale back its bond-buying program this year and end it in 2014.
“The market is gradually coming to its senses after the last week’s sell-off,” Dmitriy Gritskevich, an analyst at OAO Promsvyazbank in Moscow, said in e-mailed note.
The government plans to publish today its proposed yield range for the auction. The rate on the securities was unchanged today at 6.82 percent after dropping 23 basis points in the past two days.
While the market remains “risk-averse,” the ministry has a chance of selling the bonds given the “comfort duration” and moderate size of the offering, Gritskevich said.
“A successful auction may encourage investors and become a trigger for buying of oversold bonds,” he said.
The ruble depreciated for a second day against the central bank’s dollar-euro basket, losing 0.3 percent to 37.6060. The Russian currency weakened 0.4 percent against the dollar to 33.1005, the steepest decline among 24 emerging-market currencies tracked by Bloomberg after the Philippine peso.
The central bank has spent the equivalent of 104.5 billion rubles of foreign currency since May 29 to curb the ruble’s slide. Bank Rossii, which reports interventions with a delay and steps up purchases if the ruble weakens beyond certain levels, spent the equivalent of 6.55 billion rubles on June 28. The ruble’s three-month volatility added one basis point to 11.12 compared with this year’s high of 11.54 on June 21, data compiled by Bloomberg show.
Brent crude advanced for a second day, adding 0.1 percent to $103.14 per barrel. Russia receives about 50 percent of its budget revenue from the oil and gas industry.
At 38.00 rubles per basket and 33.00 per dollar the ruble looks “bullet-proof” with current oil prices, “especially if risks of massive hedging by foreign OFZ holders have been reduced,” Vladimir Kolychev, an analyst at OAO Rosbank (ROSB), said by e-mail.
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