Russian Yields Lowest in Almost a Year as Calpers Joins Bulls

  • Ruble extends strongest monthly gain in emerging markets
  • Forward rates now signal central bank will resume easing cycle

Russian government bonds rose for a second day, pushing yields on longer-maturity notes to the lowest since November on speculation a stabilizing ruble will allow the central bank to resume interest-rate reductions.

The Bank of Russia kept rates on hold in September for the first time this year as policy makers sought to avoid spurring inflation through a weaker ruble. The Russian currency is the best-performer in emerging markets this month after the price of oil rebounded. California Public Employees’ Retirement System, the largest U.S. pension fund, believes a stable ruble may allow it to keep buying Russian bonds after building a $250 million position in local-currency notes, senior portfolio manager Mike Rosborough said in an interview with Bloomberg on Wednesday.

“The likelihood of the central bank cutting rates has increased,” Alexey Korolenko, a money manager at UralSib Asset Management, said by e-mail. “Oil and the ruble have climbed.”

The yield on Russia’s January 2028 ruble bond fell one basis point to 10.31 percent, the lowest since Nov. 25 last year. The ruble advanced 1.2 percent against the dollar to 61.94 by 7:27 p.m. in Moscow, extending its rally this month to 5.6 percent. Brent crude declined 1.2 percent to $48.55 per barrel after climbing to the highest level in more than a month last week.

In the last two months, local government bonds have handed investors a 9.5 percent return in dollar terms, the best among emerging markets tracked by Bloomberg. Forward-rate agreements showed traders predicting 19 basis points of interest-rate increases in mid-August in the next three months, compared with 14 basis points of cuts as of Thursday.

The Micex Index closed up 0.5 percent at 1,731.91, the third day of gains. Sberbank PJSC and Gazprom PJSC paced the advance.

Alrosa PJSC, the world’s largest diamond miner, dropped 1.8 percent. The
company said it’s not in talks and has no plans to buy Polyus Gold International Ltd. after Kommersant reported Alrosa may buy Polyus when billionaire Suleiman Kerimov’s
family obtains control in the gold mining company.

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