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By Bloomberg

Russia plans to offer its longest-dated debt since November as rebounding oil and a cease-fire agreement in Ukraine drive this month’s biggest bond, currency and equity gains in emerging markets.

Russia’s borrowing costs have fallen to two-month lows and the ruble, the worst performer in emerging markets in the past year, has strengthened 10 percent versus the dollar in February. After selling the most debt in a year at a bond auction last week, the Finance Ministry will offer 10 billion rubles ($160 million) of floating-rate bonds due January 2020 and 5 billion rubles of fixed-rate debt maturing August 2023.

The sale planned for Wednesday shows that Russia, which is facing its widest fiscal deficit since 2010 this year, is seizing on improved investor appetite to bolster its financial position. Oil, the nation’s biggest export earner, increased to the highest level since Dec. 11 on Tuesday and the weekend cease-fire in eastern Ukraine has helped drive gains in all asset classes even as fighting calls the accord into question.

“The Finance Ministry has always said that it wants to borrow for a longer term, it’s just that the market didn’t allow it,” Dmitry Dudkin, the head of research at UralSib Capital in Moscow, said by e-mail. “Oil has risen, there’s a certain de- escalation of the Ukraine conflict, and the most important thing is that the ruble has stabilized.”

The currency appreciated 1.1 percent to 62.5270 per dollar by 4:16 p.m. in Moscow, helping extend the largest gain this month among 24 developing countries tracked by Bloomberg. Russian local-currency securities are also the best performers in the Bloomberg Emerging Market Local Sovereign Index in February.

Oil Rebound

The dollar-denominated RTS Index has climbed the most among 93 stock indexes globally with a 24 percent gain since January. OAO Sberbank and OAO Gazprom led the advances in the benchmark Micex Index today, climbing 4 percent and 1.9 percent, respectively.

The primary reason for the recovery in Russian assets has been the 38 percent recovery in Brent crude from an almost six- year low in January. Along with natural gas, oil contributes about 50 percent to state revenue.

The ruble is undervalued based on current oil prices and has some “further catch-up” to do, Ivan Tchakarov, an economist for Russia at Citigroup Inc. in Moscow, said in e- mailed comments. The currency should strengthen to about 58 versus the greenback, he said.

Ukraine Fighting

The plunge in oil, still down 43 percent in the past 12 months, hammered Russia’s economy along with U.S. and European Union sanctions over the conflict in Ukraine. The country is facing both its first recession since 2009 and a budget deficit equivalent to 2.5 percent of economic output in 2015, according to forecasts compiled by Bloomberg.

The yield on five-year government notes fell 17 basis points to 12.79 percent on Tuesday, capping a five-day decline of 104 basis points. The rate remains almost five percentage points higher than it was before President Vladimir Putin’s incursion into Ukraine started in March last year.

Following the weekend cease-fire, insurgents continued shelling the town of Debaltseve, the key rail junction, in eastern Ukraine, according Ukrainian military spokesman Andriy Lysenko. Five government soldiers were killed and 25 wounded in fighting near the strategic port city of Mariupol, Ukrainian military spokesman Dmytro Chalyi said by phone on Monday. Rebels blame Ukraine for repeatedly violating the truce.

“If the latest cease-fire holds, it’s possible that some sanctions against Russia won’t be extended, which would positively impact Russian assets,” Vitaly Isakov, a money manager at Otkritie Asset Management in Moscow, said by e-mail.