Yield on 2015 Ruble Bond Falls to Record, Ruble Little Changed

Yields on Russia’s short-dated ruble bonds fell to record lows, as investors switched into them from the longer maturities that the government focuses on offering at primary auctions.

The yield on the OFZ due in June 2015 fell by one basis point to 5.99 percent. The ruble rose 0.1 percent against the central bank’s target basket of dollars and euros to 34.6637 by 7 p.m.

“Short and mid-dated notes have always enjoyed more investment demand, and their volatility is insignificant,” Alexander Nikonov, head of fixed income at Region Broker Co. LLC, said by e-mail.

The Finance Ministry began to focus on supplying bonds with terms of five to 15 years at weekly auctions last year to lengthen the average maturity of outstanding ruble debt. The government will offer 20 billion rubles ($664 million) of seven-year debt and 9.92 billion rubles of 15-year debt at sales on Feb. 20, according to the ministry’s preliminary schedule for the first quarter.

Yields on the OFZ due in February 2027 rose for the fourth session out of last five to reach 7.1 percent, the highest since Jan. 8. Selling in the bond may have been due to the auction this week, Olga Sterina, an analyst at UralSib Financial Corp, in Moscow, said by e-mail.

While Euroclear Bank SA began direct settlement of over-the-counter transactions with Russian government ruble debt on Feb. 7, the country last week had its worst auction for longer-maturity bonds since this year’s first sale. The government sold 10.7 billion rubles of 10-year securities out of 25 billion rubles offered.

Selling pressure on longer-dated bonds is due to their “speculative nature,” Region’s Nikonov said. “The admission of OFZs to Euroclear as a trade idea has already been played out”.

The ruble was little changed against the dollar at 30.1345 at 7 p.m. in Moscow. Crude oil, the country’s main export earner, fell 0.1 percent to $117.56 a barrel in London.

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