Azernews.Az

By Bloomberg

The ruble gained for a fourth day and bonds climbed, driving Russian government borrowing costs to the lowest in more than a month before debt sales on Wednesday.

About 580 billion rubles ($10 billion) of corporate taxes due today are supporting the Russian currency, which jumped 1.5 percent and traded below 57 versus the dollar for the first time this year. The Finance Ministry is offering 16.2 billion rubles of bonds at its last debt auction this quarter.

“The Russian currency has exceeded even our rather optimistic forecasts,” Dmitry Polevoy, chief economist for Russia and Commonwealth of Independent States at ING Groep NV in Moscow, said by e-mail. “Such swift gains in the ruble can encourage exporters to sell FX outside the tax period and even flows from the population.”

Russian assets are climbing as oil prices and the ruble settle into a “more normal trading environment,” Sberbank CIB analysts Kingsmill Bond and Andrey Kuznetsov wrote in a note to clients Wednesday. By offering shorter floating-rate bonds that protect against changing interest rates, the Finance Ministry has lured back investors to its bond sales after axing 27 auctions in 2014 as oil fell and the crisis in Ukraine deepened.

While the price of Brent crude is about 50 percent lower than at its peak last year, the benchmark used to price Russia’s main export blend has climbed 22 percent from a low in January. Brent was little changed at $55.12 a barrel on Wednesday.

Fueling Appetite

The Finance Ministry has sold 87 billion rubles of local bonds this quarter, more than half the amount it raised in the whole of last year, amid the best currency rally in emerging markets. The ministry will offer 6.2 billion rubles of floating- coupon bonds due in December 2017 and 10 billion rubles of August 2023 notes on Wednesday.

Yields on Russian five-year bonds dropped nine basis points to 12.70 percent as of 11:29 a.m. in Moscow, extending their fall from the start of the year to 2.71 percentage points. The yield on the August 2023 bonds was unchanged at 12.79 percent, two basis points above the lowest level since Feb. 20.

Russia is finalizing rules for inflation-linked bonds, which it may offer as early as next quarter, according to VTB Capital analysts Maxim Korovin and Tatiana Zueva, who cited a ministry conference call with investors yesterday.