Ruble Rises to July High as Dividends Paid: Russia Reality Check

As markets react in real time to Russia’s incursion into Crimea and the annexation of the Black Sea peninsula, the ruble rose to the highest level this month as companies bought the currency to pay dividends and the government sold almost all the bonds offered at an auction.

The currency strengthened 0.6 percent to 34.0325 per dollar by 6 p.m. in Moscow, extending its gain since Feb. 28, a day before President Vladimir Putin’s incursion, to 5.4 percent. Russian companies have completed about 25 percent of their total payments this dividend season and will transfer $5 billion to $6 billion in the last week of July, according to VTB Capital analysts Maxim Korovin and Anton Nikitin. The government sold 9.4 billion rubles of the 10 billion rubles ($293 million) of bonds due May 2020 offered at an auction today.

The chart shows the performance of stocks, bonds and the ruble, along with indicators of Russian investment risk. The yield on ruble bonds due February 2027 rose four basis points to 8.57 percent, giving an increase since Feb. 28 of 21 basis points. The Micex Index retreated 0.2 percent to 1,513.38, paring its gain in the period to 4.8 percent.

The top panel displays the value of the Micex Index of 50 Russian equities, government debt in the Bloomberg Russia Local Sovereign Bond Index, and the ruble relative to the dollar. Credit default swap rates on Russian bonds due in five years appear in the bottom panel. The yield gap between Russian debt and U.S. Treasuries and the one-month implied volatility of the ruble are also tracked.

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