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By Bloomberg

Russia raised the entire amount it planned at a bond auction as the government’s borrowing costs fell to an 11-week low, while stocks extended this month’s biggest advance worldwide.

Investors have been piling into assets of the world’s biggest energy exporter after oil rebounded above $60 a barrel, helping offset concern over violations to a cease-fire in eastern Ukraine. The rally in local-currency bonds known as OFZs, which handed investors 21 percent this month in dollar terms, paved the way for Russia to sell 15 billion rubles ($240 million) of notes due in 2020 and 2023 at its weekly sale, the longest maturities since November.

“Lately, the demand for OFZs has been quite amazing,” Dmitry Dudkin, the head of fixed-income research at Uralsib Capital in Moscow, said by e-mail. “There’s optimism in the market, but OFZs are getting quite expensive.”

Russia is seizing on the fundraising window as the economy verges on a recession and an increase in state spending to support the nation’s banks leads analysts to project the largest annual fiscal deficit, as a percentage of gross domestic product, since 2010. The yield on five-year government bonds dropped 34 basis points to 12.49 percent by 3:40 p.m. in Moscow, the lowest on a closing basis since Dec. 5.

A surprise central bank interest-rate cut in January has helped boost appetite for bonds, enabling the government to work toward a 150 billion-ruble fundraising target this quarter. So far it has raised 45.8 billion rubles, according to data compiled by Bloomberg.

Bigger Demand

The offering of 10 billion rubles of floating-rate debt due in January 2020 on Wednesday received bids valued at three times that amount, and the Finance Ministry paid an average yield of 13.32 percent. The government also raised 5 billion rubles from the sale of fixed-rate debt maturing August 2023.

Russia reintroduced floaters for the first time in more than a decade last month, although before today it offered shorter maturities to drum up demand. Last week it tendered 15 billion rubles of debt due in December 2017 and got bids for more than double that amount.

“Floaters are a really interesting instrument, we really like it,” Konstantin Nemnov, who oversees $1 billion as the head of fixed income at TKB BNP Paribas Investment Partners in St. Petersburg, said by phone. “The combination of a high yield against the backdrop of market volatility offers protection for investors,” according to Nemnov, who wants to add the debt to his portfolio.

The ruble strengthened 0.2 percent to 62.3720 a dollar, bringing its increase in February to 10 percent, the most among currencies monitored by Bloomberg. Increased appetite for Russian risk helped boost the dollar-denominated RTS Index by 2.7 percent in the largest advance among developing countries. The RTS has rallied 16 percent this year.

Oil ‘Comfortable’

Oil, which along with natural gas accounts for about 50 percent of state revenue, fell 1.9 percent to $61.37 a barrel in London, trimming this month’s increase to 16 percent.

“For Russia, oil above $60 is much more comfortable,” Vadim Bit-Avragim, a money manager in Moscow at Kapital Asset Management LLC, which oversees 175.4 billion rubles, said by phone. “Investors are increasingly turning their attention to the price of oil and global events and away from the situation in Ukraine.”

A cease-fire that came into effect in eastern Ukraine four days ago was on the brink of collapse on Wednesday as the battle for a transport hub came to a head, with the government seeking to withdraw its forces after weeks of fighting to hold on to the strategic location. The U.S. and European Union accuse Russia of aiding Ukrainian separatists, a claim President Vladimir Putin has denied.

The ruble remains 43 percent weaker since Putin’s incursion into Crimea started almost a year ago. The annexation of the Black Sea peninsula in March unleashed a standoff with the U.S. and its allies and sparked sanctions that drove up the country’s borrowing costs, forcing it to cancel 27 bond auctions in 2014.