Russia 2027 Bonds Fall 6th Day as Risk Bets Wane; OFZ Sale AxedVladimir Kuznetsov
Russia’s ruble bonds due 2027 fell for a sixth day as investor appetite for riskier emerging-market debt declined.
Yields on the OFZ bonds rose two basis points, or 0.02 percentage point, to 7.12 percent as of 7 p.m. in Moscow. The ruble was little changed against the central bank’s target basket of dollars and euros and was steady versus the dollar at 30.1020.
The Finance Ministry canceled its scheduled sale of 9.9 billion rubles ($329 million) of 2027 bonds tomorrow “after analyzing market conditions,” according to a statement on its website today. It last scrapped a sale in October. JPMorgan Chase & Co.’s EMBI+ index of emerging-market debt has declined about 2.6 percent from a record high of 714 reached on Jan 3.
“There’s modest demand only in short and medium-term OFZs,” Yulia Safarbakova, an analyst at BCS Financial Group, said by e-mail. “The long-awaited inflow of funds into long-term OFZs is likely to resume with the recovery of global demand for emerging markets debt.”
The ministry boosted the amount of seven-year ruble securities on offer tomorrow to 30 billion rubles from 20 billion, setting yield guidance of 6.51 percent to 6.56 percent, according to the website statement.
The government sold only 43 percent of the 10-year securities it offered at an auction last week, its first sale since Euroclear Bank SA began direct settlement of over-the-counter transactions for foreign investors on Feb. 7.
The decision to cancel the 15-year offering makes sense given the lack of appetite for longer-dated bonds, according to Vladimir Kolychev, head of research at Societe Generale SA’s OAO Rosbank unit.
“At least it should reassure investors that the Finance Ministry is not going to place long-term bonds at any cost,” Kolychev said by e-mail. That may “cool down the selling pressure.”
Ruble-denominated government debt rallied in the second half of 2012, lowering the yield on the 2027 notes by 225 basis points from a 52-week high in June to a record low on Jan. 10 on bets that easier foreign access would boost demand.
Yields climbed in January and February due to “profit taking” around the Euroclear announcement, Maxim Korovin and Anton Nikitin, analysts at VTB Capital in Moscow, said by e-mail.