Ruble to Micex Decline on U.S. Sanction Woes, Siluanov Comments

The ruble weakened the most in a month and stocks retreated after Russia said it planned to buy foreign currency and U.S. lawmakers passed a bill for more sanctions. Bonds dropped as the government sold fewer bonds than offered at its first auction in five weeks.

The ruble declined 0.7 percent to 41.3838 versus the central bank’s target basket of dollars and euros by 6 p.m., the most on a closing basis since March 7. The Micex Index slid 0.2 percent to 1,373.33 by the close after climbing to a one-month high yesterday. The yield on government debt due August 2023 climbed nine basis points to 8.93 percent, the first increase in four days.

Russia will resume buying foreign exchange in days for the Reserve Fund, Finance Minister Anton Siluanov said in Moscow today. The government sold 7.73 billion rubles ($219 million) of bonds, less than the 20 billion rubles offered. The U.S. House yesterday approved a range of sanctions against Russian officials deemed responsible for corruption and violence.

“The ruble posted a strong drop after Siluanov’s comments,” Igor Akinshin, a foreign-exchange trader at OAO Alfa Bank, said by phone from Moscow. “Because of the concern over sanctions, traders are reluctant to trade the ruble.”

The bill, which U.S. lawmakers approved 378-34 yesterday, imposes sanctions against Russians and Ukrainians deemed responsible for corruption and violence. It goes to President Barack Obama to be signed into law.

Market Rout

President Vladimir Putin’s incursion into Ukraine’s Crimea last month triggered a sell-off in stocks and bonds that sent the benchmark equity gauge to an almost four-year low and the 2023 yield to a record 9.70 percent. Stocks have recovered 63 percent of their losses since then and yields fell 77 basis points.

The sanctions against Russian officials and their close associates or family members may include blocking access to assets they hold in the U.S. and prohibiting travel to the U.S.

Financial shares were the second-biggest declining industry group among nine in the Micex, losing 1.2 percent on average. VTB Group retreated 1.1 percent to 3.895 kopeks. OAO Sberbank, the nation’s biggest lender, fell 1.4 percent to 82.67 rubles.

Any Russian bank could face sanctions, VTB Chief Executive Officer Andrey Kostin said in Moscow today. Russia is facing a Cold War-like situation, he said.

Russia’s Foreign Ministry yesterday rebuked JPMorgan Chase & Co. for blocking a payment from its embassy in Astana to OAO SOGAZ, an insurance agency, because of the U.S. sanctions.

JPMorgan Incident

The JPMorgan incident “makes investors reconsider risks of investing in Russian banks,” Oleg Popov, who helps manage $1 billion of securities for Allianz Investments in Moscow, said by e-mail.

“As with all U.S. financial institutions that operate globally, we are subject to specific regulatory requirements,” JPMorgan spokesman Brian Marchiony wrote in an e-mail yesterday. “We will continue to seek guidance from the U.S. government on implementing their recent sanctions.”

OAO Rostelecom surged as much as 11 percent and was up 8.1 percent at 90.20 rubles. The stock resumed trading today after it was suspended during reorganization from March 25.

The Finance Ministry, which canceled four auctions in a row before this week, sold 5.5 billion rubles of May 2019 OFZ notes and 2.3 billion rubles of the August 2023 bonds, it said in a website statement today. It offered 10 billion rubles each of the securities.

Building Reserve

The ruble tumbled 0.8 percent to 35.3750 versus the dollar. The currency is down 7 percent this year, the worst performance after Argentina’s peso among 24 emerging-market peers monitored by Bloomberg.

Russia will “likely” sell 3.5 billion rubles a day to buy foreign exchange for the Reserve Fund, Deputy Finance Minister Alexey Moiseev said at a conference in Moscow today.

Russia-dedicated stock funds received $219 million in inflows in the week ended March 26, according to EPFR Global. That helped trim outflows from stocks and bonds to $4.03 billion over the same period, approaching $6.1 billion pulled in all of 2013, according to data compiled by EPFR Global.

The dollar-denominated RTS Index slipped 1.1 percent to 1,222.47. The yield on ruble-denominated government debt due February 2027 rose nine basis points to 9.02 percent.