Azernews.Az

By Bloomberg

Russian government bonds rose, pushing yields to a one-month low, on investor bets decelerating inflation may spur the central bank to lower borrowing costs at this month’s meeting.

Yields on five-year ruble government bonds, known as OFZs, dropped four basis points to 10.75 percent, bringing the decline in the past seven days to 55 basis points. The ruble appreciated 0.1 percent versus the dollar to 56.8930 as of 12:50 p.m. in Moscow as crude oil rebounded from the lowest close in more than three months.

The Bank of Russia may lower the benchmark interest rate by 50 to 100 basis points at its July 31 meeting, according to Kirill Sychev, a Moscow-based analyst at Bank Zenit. Data yesterday showed weekly consumer-price growth slowed to 0.1 percent from 0.7 percent in the seven days to July 13. Investor sentiment has improved this week as the Greek debt crisis showed signs of abating and the selloff in Chinese markets paused.

“Most emerging markets bonds in local currencies are on the same trajectory,” Sychev said by e-mail. “But OFZs are outperforming.”

Russian local currency sovereign bonds have returned 30 percent so far this year, the most among emerging markets, tracked by Bloomberg.

Bank of Russia has lowered the key interest rate by 550 basis points cumulatively since the beginning of the year to 11.5 percent, almost unwinding December’s emergency increase. Russian inflation has been slowing since touching a 13-year high of 16.9 percent in March.

While the Bank of Russia is targeting consumer-price increases of 4 percent in the medium term, the rate averaged 9.3 percent in the decade to 2014.