Floating-Rate Debt Favored as Inflation Quickens: Russia Credit

Traders are stepping up bets Russia will begin lifting borrowing costs from record lows to stem inflation, spurring gains in debt linked to central bank rates and losses on fixed-rate bonds.

OAO Transneft ruble notes due in 2019 with a coupon tied to Bank Rossii’s one-year repurchase rate jumped 7.1 percent since the central bank last reviewed target borrowing costs Nov. 26. Similar-maturity debt issued by the pipeline operator paying a fixed rate dropped 1.1 percent, data compiled by Bloomberg show. Notes due in 2013 from IK Strategia, a Perm-based investment company, that are tied to the refinancing rate surged 31 percent in the period versus a 34 percent drop in similar maturity fixed-rate debt of food retailer OAO Magnit, the data show.