Azernews.Az

By Bloomberg

The ruble fell, extending its biggest monthly drop since January, as almost $8 billion of foreign corporate debt payments coming due in July signaled to Rabobank that more weakness is in store.

Russia’s currency, which advanced in the last two days due to tax-payment deadlines, decreased 0.8 percent to 54.266 per dollar by 2:43 p.m. in Moscow, bringing the depreciation in June to 3.6 percent. Equities also retreated as Lenta Ltd. slumped the most this year after a shareholder sold stock at a discount. Sovereign bonds rose as the government held a weekly debt sale.

Maturing foreign debts have spurred declines in the ruble since the U.S. and Europe imposed sanctions on some Russian companies last year that have made it almost impossible for them to refinance abroad. While the pipeline of maturing external debt waned in April and May, it reached a three-month high of $10.2 billion in June and another $7.68 billion comes due in July, according to central bank data.

Under pressure from foreign debt payments, “the ruble will struggle to regain its bullish momentum against the U.S. dollar even if oil prices move higher,” Piotr Matys, a London-based foreign-exchange strategist at Rabobank, said by e-mail. The currency is “stuck” in a range of trading between the recent low at 57.1873 per dollar and the equilibrium level seen at around 48-50 on the upside, he said.

Oil, Russia’s main export earner, was little changed at $64.46 a barrel in London. The ruble extended the biggest decline in emerging markets today as Greece’s creditors handed the government revised terms for an agreement on bailout funds and Prime Minister Alexis Tsipras expressed incredulity that his own list of proposals had fallen short.

Lenta Drops

Yields on five-year Russian bonds decreased three basis points to 11.10 percent. The Finance Ministry raised the entire 7.49 billion rubles ($138 million) of August 2023 bonds it was seeking, while another 10 billion rubles of notes due in May 2020 bonds will be auctioned later today. If that sells out too, the government will meet its quarterly borrowing plan for the first time since 2011.

While the pace of central bank interest-rate cuts will probably slow, the prospect for further easing is “why market players are still willing to buy OFZs at current levels,” Dmitry Polevoy, the chief economist at ING Groep NV in Moscow, said by e-mail.

The Micex Index fell 0.6 percent as hypermarket chain Lenta slumped 9.4 percent in Moscow and 11.1 percent in London. The European Bank for Reconstruction and Development sold 17.8 million of the company’s global depositary receipts at $7.85 in a private placement, representing a 7.6 percent discount to their closing price yesterday.

“The outlook for the Russian retail sector is no longer rosy considering the economic slowdown and the drop in spending,” Vadim Bit-Avragim, a money manager at Kapital Asset Management LLC in Moscow, which oversees 175.4 billion rubles, said by phone.