Azernews.Az

By Bloomberg

Russia sold less than a third of the floating-rate bonds it offered in its first debt auction this quarter as expectations the central bank will continue cutting rates crimped demand.

The Finance Ministry sold 4.68 billion rubles ($81 million) of the 15 billion rubles tendered in floating-rate 2020 bonds, according to a statement on its website. Five-year fixed-rate government debt advanced, lowering the yield 24 basis points to 12.22 percent as of 2:29 p.m. in Moscow and taking the drop since the start of the year to 3.19 percentage points.

Bonds rallied this year as the central bank cut benchmark interest rates by 300 basis points to 14 percent, unwinding almost half an emergency increase in December at the peak of the country’s market turmoil. Russia is offering 20 billion rubles of bonds in total on Wednesday, the most since Feb. 11, after taking advantage of demand for shorter-maturity debt and floating-coupon bonds to meet about 70 percent of its borrowing target for the first three months of the year.

“The longer-maturity floater is less attractive compared to fixed-coupon bonds in an environment where rates are on a declining path,” Dmitry Dudkin, the head of research at Uralsib Capital in Moscow, said by e-mail on Wednesday.

The coupon on the floaters is linked to the average of the Ruonia lending rate in the previous six months. Russia will also offer 5 billion rubles of fixed-coupon OFZs due in January 2028. The yield on the longer-dated debt was 12 basis points lower at 11.97 percent, extending its decline since the start of the year to 1.23 percentage points.

Ruble Climbs

The ruble erased earlier declines, strengthening 0.4 percent against the dollar to 57.97 and extending a 5.8 percent gain in March. Brent crude, Russia’s main export earner added 0.2 percent to $55.23 per barrel.

“At oil’s current levels, the ruble should be weaker, I’d say it should be around 60,” Artem Roschin, a foreign-exchange dealer at Aljba Alliance bank, said by phone. “The ruble had strengthened a lot in March during the tax season. I expect the ruble to weaken.”

Russia’s dollar-denominated RTS Index of equities rose 2.4 percent to 901.21. The Micex Index gained 2 percent after rallying 16 percent during the first quarter, the biggest advance for the period since 2010.