Bloomberg News

Ruble Drops Most in Nine Days as Bonds Fall on S&P, Elections

December 07, 2011

Dec. 6 (Bloomberg) -- The ruble weakened the most in nine days and bonds fell after Standard & Poor’s said it may strip Germany and France of their AAA debt ratings and as Interior Ministry troops patrolled Moscow amid anti-government protests.

Russia’s currency depreciated 1.1 percent to 31.205 per dollar at the close in Moscow, the most since Nov. 23. The yield on ruble government bonds due August 2016 jumped 13 basis points to 8.04 percent, the biggest increase since Nov. 15.

S&P said yesterday it put 15 euro nations on review for possible downgrades depending on the result of a European Union summit on Dec. 9. U.S. Secretary of State Hillary Clinton, at a gathering of the Organization for Security Cooperation in Europe today, called for an investigation into allegations of electoral fraud in Russian elections last weekend. S&P said Vladimir Putin’s reduced majority in parliament after the ballot may damp his willingness for spending cuts needed for a higher rating.

Ruble trades currently “depend on European developments,” Denis Korshilov, head of fixed-income, currencies and commodities at Citigroup Inc. in Moscow, said by e-mail. “The level of uncertainty has moved up a bit after all the discussions about falsifications and stronger protesting behavior of the population. That probably resulted in some fresh capital outflow.”

The benchmark Micex Index of stocks sank 4 percent, the most since Nov. 21.

Elections, Police

About 2,000 servicemen and 2,000 police officers have been on duty in Moscow every day since the Dec. 4 parliamentary elections, a duty officer at the Moscow police press service said by phone today. Police said about 300 people were detained after a protest yesterday. The ruling United Russia party won 49.5 percent of the vote, its worst performance since 2003, according to preliminary results.

“I wouldn’t get too excited about this -- Russia is very unlikely to see an Arab Spring or Orange Revolution,” Tim Ash, head of emerging-markets strategy at Royal Bank of Scotland Group Plc, wrote in an e-mailed note. “Most Russians outside Moscow and St. Petersburg still value the stability and growth that Putin has delivered.”

Capital flight may exceed $85 billion this year, acting Finance Minister Anton Siluanov said in Moscow yesterday. Central Bank Chairman Sergey Ignatiev told reporters on Nov. 2 that outflows would total $73.6 billion this year.

The ruble has lost 2 percent against the dollar this year, heading for a fourth consecutive annual decline. Brazil’s real dropped 7.4 percent in the period, India’s rupee depreciated 13 percent and the Chinese yuan gained 3.8 percent against the U.S. currency.

Forwards

Investors increased bets the ruble would weaken further, with non-deliverable forwards showing the currency at 31.6025 per dollar in three months, compared with expectations of 31.225 per dollar yesterday.

Russia’s currency was 0.3 percent weaker at 41.73 per euro, leaving it down 0.7 percent at 35.9413 against the central bank’s target dollar-euro basket.

Russia’s $3.5 billion of Eurobonds due 2020 rose, pushing the yield down nine basis points, or 0.09 percentage point, to 4.349 percent. Dollar-denominated notes due 2015 yielded one basis points less than yesterday, at 3.022 percent.

--Editors: Linda Shen, Peter Branton

To contact the reporter on this story: Jack Jordan in Moscow at jjordan22@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net -0- Dec/06/2011 16:00 GMT


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