Azernews.Az

By Bloomberg

Russia sold almost all the debt it offered at an auction of floating-rate bonds today after selling out its previous three debt offerings amid a pick up in demand. Bonds rose for a second day and the ruble strengthened.

The Finance Ministry sold 13 billion rubles ($211 million) of the 15 billion rubles tendered as it reopens the nation’s local debt market by offering securities to protect against inflation, which is approaching a 13-year high. Growing demand for local debt amid a recovery in oil prices and a cease-fire in eastern Ukraine has helped Russia boost fundraising by 83 percent compared with the same period last year. The yield on five-year government bonds fell 31 basis points to 13.91 percent by 3:41 p.m. in Moscow.

“The Finance Ministry is purely exploring a specific demand gap in the local markets,” Luis Costa, head of strategy for central and eastern Europe, Middle East and Africa at Citigroup Inc. in London, said by e-mail.

Russia is stepping up its fundraising efforts as part of a target to sell 150 billion rubles of local bonds known as OFZs this quarter. The country, facing its first recession since 2009 and widest fiscal deficit ratio in five years, was forced to cancel 27 bond sales in 2014 due to surging borrowing costs as the ruble plunged amid escalating sanctions over the conflict in Ukraine.

The sale was the Finance Ministry’s fifth offering of floaters since reintroducing the instrument in January for the first time in more than a decade. The notes are linked to the Ruonia overnight rate, which climbed 21 basis points to 15.7 percent on March 2. Russia has sold 68.8 billion rubles of debt at par value in 2015. It raised 158 billion rubles on the local market last year, less than a fifth of the target.

Rate Meeting

The ruble strengthened 0.3 percent to 61.7180 against the dollar on Wednesday, trimming its loss in 2015 to 1.6 percent, the best performance among 14 currencies in developing Europe.

Russia’s exchange rate remains 41 percent weaker in the past 12 months largely due to the 44 percent slide in Brent crude, the benchmark used to price the nation’s main export blend. Brent fell 0.5 percent to $60.72 a barrel in London on Wednesday.

Demand for Russian debt has improved since the central bank unexpectedly cut its benchmark interest rate by 200 basis points to 15 percent on Jan. 30 to shore up the economy. Data on Wednesday showed gross domestic product shrank 1.1 percent in January on a seasonally adjusted basis.

With the economy headed for recession and the inflation rate projected to have climbed to 16.7 percent in February, the fastest since 2002, policy makers are weighing whether they can make further cuts at their next meeting on March 13.

Derivatives known as forward-rate agreements showed expectations for a 47 basis-point reduction in benchmark borrowing costs in the next three to six months on Tuesday, the least since the central bank unexpectedly hoisted interest rates by 6.5 percentage points on Dec. 16, data compiled by Bloomberg show.