Russia Eurobond Yield Hits 18-Month High on Axed Auction, Crude

Russian Eurobond yields jumped to the highest in 18 months and the ruble weakened as the government axed a second bond auction amid speculation China’s economic growth may slow.

The ruble dropped 0.4 percent against the dollar to 32.92 by 6 p.m. in Moscow, the seventh-worst performance among 24 emerging-market currencies tracked by Bloomberg. The currency lost 0.1 percent versus the central bank’s dollar-euro basket to 37.5055. The yield on Russia’s Eurobonds due March 2030 rose 32 basis points to 4.64 percent, the highest since December 2011.

The Finance Ministry canceled a June 26 sale, the last this quarter, because of current market conditions, according to a website statement today. China’s central bank said the nation should fine-tune its policies as a cash squeeze in the banking system risks exacerbating an economic slowdown. Brent oil tumbled 0.7 percent to $100.17 per barrel, falling as low as $99.67 today. Crude and natural gas provide about 50 percent of Russia’s state revenue.

“The situation with the Chinese slowdown is driving oil below $100 today,” Igor Akinshin, a foreign exchange trader at Alfa Bank, said by phone from Moscow. “There are no drivers for the ruble, the weakening trend persists, people are selling the currency.”

The Russian currency and debt joined a global market rout last week after Fed Chairman Ben S. Bernanke said the regulator may start reducing bond purchases that have fueled asset-price gains, and end the program in 2014 should risks to the U.S. economy abate.

Auctions Scrapped

Russia canceled a June 5 auction and shelved a sale of 10 billion rubles ($303 million) of 15-year notes last week, citing a lack of competitive bids. The government scrapped a May 22 sale for the same reason and sold only 900 million rubles of 20 billion rubles in securities offered on May 29.

The central bank started buying rubles on May 29 to slow its slide. Bank Rossii, which reports currency intervention data with a delay and steps up interventions if the ruble weakens beyond certain levels, spent the equivalent of 6.54 billion rubles ($199 million) of foreign currency on June 20, it said today.

The yield on benchmark ruble bonds due 2027 jumped 32 basis points to 8.37 percent, the highest since July.

Investors are pulling money from emerging markets at the fastest pace in two years. More than $19 billion left funds investing in developing-nation assets in the three weeks to June 12, the most since 2011, according to EPFR Global.

Before it's here, it's on the Bloomberg Terminal.