Russia Bond Yields Climb After Inflation Data as Ruble Rises

Russia’s ruble-denominated government bonds declined from a record high as inflation accelerated in April. The ruble strengthened against the dollar.

The yield on benchmark OFZs due February 2027 increased two basis points, or 0.02 percentage point, to 6.79 percent by 6 p.m. in Moscow. The ruble stayed little changed versus Bank Rossii’s target dollar-euro basket at 35.3275, while advancing 0.2 percent against the dollar to 30.9885.

Russian inflation accelerated to 7.2 percent in April after slowing to 7 percent a month earlier, the Federal Statistics Service in Moscow said by e-mail today. That’s more than one percentage point above the upper boundary of Bank Rossii’s target inflation range of 5 percent to 6 percent.

“In the coming days we expect profit taking and higher OFZ yields,” Sberbank CIB analysts led by Alexander Kudrin said in a note to clients.

The yield on the 2027 OFZs has dropped 56 basis points since the start of April on greater foreign appetite for Russian and emerging-market bonds. Inflows into Russia-dedicated bond funds rose to $327 million in the week through May 1, according to OAO Gazprombank citing EPFR Global data. Inflows into emerging-market debt funds were a record $2.5 billion, Gazprombank said.

“The main market drivers are currently foreigners,” Denis Poryvay, analyst at ZAO Raiffeisenbank in Moscow, said by phone. “A nominal yield of slightly below 7 percent for foreigners is appealing. If they don’t have a negative view on oil and the ruble, they simply buy a quality security at 7 percent yield.”

Oil in New York snapped three days of gains, declining 0.2 percent to $95.95 per barrel. The oil and gas industries provide about 50 percent of Russia’s state budget revenue.

Inflation should be back to 7 percent in June, the Sberbank analysts said. The bank has a “positive view on the market” in the long term, they wrote.

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