Russia Pulls Debt Sale as Oil Slump Sends Yields to 5-Year High

Russia canceled tomorrow’s ruble-bond auction after an oil-price slump sent the nation’s borrowing costs soaring to a five-year high.

The Finance Ministry pulled the offering due to “unfavorable market conditions,” according to a statement on its website today. The yield on 10-year local-currency bonds climbed six basis points to 9.93 percent at 2:47 p.m. in Moscow, the highest since 2009 on a closing basis. The debt had its worst week since August in the five days through Oct. 10.

Russia has skipped 18 bond auctions this year as President Vladimir Putin’s standoff with the U.S. and its allies over Ukraine and tougher sanctions triggered a selloff in the nation’s assets. The government resumed debt sales last month after canceling nine auctions in a row from July. Oil’s slide to four-year lows increased pressure on the ruble this month, leading the central bank to spend more than $6 billion to shore up the currency.

The country, which derives almost half of its budget revenue from the oil and gas industries, said last month it planned to borrow 200 billion rubles ($4.9 billion) of debt this quarter. It has so far raised less than 8 percent of that total. At auctions in the last two weeks, it sold less than planned.

The ruble depreciated 16 percent against the dollar in the past three months, the weakest result among over 170 global currencies monitored by Bloomberg. It fell 0.5 percent to 40.7065 per dollar today.

The depreciation has helped boost government revenue from exports denominated in foreign currencies. Russia’s budget surplus swelled to 1.11 trillion rubles in the first nine months of 2014, a 70 percent jump from the year-earlier period.

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