Russia’s Ruble Slides With Bonds as Brexit Sparks Growth Concern

  • Government OFZ yields headed for 19bps increase in week
  • Brent crude set for longest streak of losses since January

Russia’s ruble declined and government borrowing costs climbed to the highest in almost two weeks as oil sank and investor appetite for emerging market assets ebbed before the U.K.’s Brexit vote.

The currency of the world’s biggest energy exporter traded 0.7 percent weaker at 65.94 per dollar as of 6:17 p.m. in Moscow, paring a 1 percent rebound on Wednesday. Five-year government bonds declined, lifting the yield three basis points to 9.12 percent, the highest since June 3 as Brent crude headed for its longest losing streak since it fell to the lowest level in more than a decade in January.

The ruble followed most emerging-market currencies lower on Thursday as oil fell and central bank meetings in the U.S. and Japan fanned concern the global economy is faltering. While Nomura International Plc said there would be little direct impact on Russia’s economy from a decision by the U.K. to quit the European Union, the nation’s assets are suffering as investors cut back on countries deemed a riskier wager.

“Brexit is generally affecting global risk appetite,” said Dmitri Petrov, a strategist on Nomura in London. “There is relatively little direct impact on Russia, but there is general global growth concern and investors asked to reduce risk.”

Brent lost 3.1 percent to $47.45 per barrel, a 9.5 percent drop in the past six days. Crude and natural gas accounts for about 60 percent of Russia’s export earnings. Bond yields are headed for a 19 basis point increase in the week, the most in three months.

“The sensitivity of Russia to oil translates to a weaker currency, which is also reducing appetite to hold bonds,” Petrov said.

The Micex Index retreated 1.5 percent to a two-month low. VanEck Vectors Russia ETF saw $94.5 million outflows on June 15, the biggest redemption since September 2013, according to data compiled by Bloomberg.

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