Russian Bonds Rise as Fed Relief Outweighs Hawkish Central Bank

  • Finance Ministry plans to sell extra $1.25b of Eurobonds today
  • Brent, emerging-market assets climb after Fed holds U.S. rates

Russian bonds advanced, eliminating declines driven by hawkish comments from the country’s central bank last week, as the Federal Reserve’s decision to delay a rate increase spurred appetite for riskier assets.

The yield on February 2027 local notes fell 11 basis points to 8.05 percent as of 12:37 p.m. in Moscow, bringing it seven basis points below its level on Thursday before the Bank of Russia poured cold water on easing bets. Stocks rose a fourth day as Brent crude traded above $47 a barrel, while the ruble retreated 0.1 percent against the dollar.

The Fed on Wednesday left U.S. borrowing costs unchanged and scaled back the number of hikes it expects for next year and beyond, boosting investor appetite for high-yielding assets in emerging markets. This, and a rebounding oil price helped eclipse the impact of the Russian central bank’s statement on Friday that it’s unlikely to continue easing until the first half of 2017 as it looks to rein in inflation.

"The Fed’s decision to stay on hold and the recovery of oil prices don’t hurt," Richard Segal, a senior analyst at Manulife Asset Management in London, said by e-mail.

Russia announced plans on Thursday to sell an additional $1.25 billion of Eurobonds, tapping a May 2026 issue, with initial yield guidance is 3.99 percent. Like the previous deal, the sole organizer of the sale is VTB Capital, the investment banking arm of Russia’s second-biggest lender.

The ruble fell 0.1 percent to 63.8825 per dollar, paring gains for the week to 1.9 percent.

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