Bloomberg News

Ruble Extends Eighth Weekly Gain; Bond Yields Fall as Oil Climbs

February 27, 2012

Feb. 24 (Bloomberg) -- The ruble strengthened against the dollar and bond yields fell to record lows as signs of economic recovery in the U.S. drove demand for oil, Russia’s chief export earner.

The Russian currency appreciated 1.7 percent to 29.185 per dollar at the 7 p.m. close in Moscow, its strongest closing price since Sept. 2. Ruble gained 2.5 percent against the greenback this week, its eighth consecutive advance and the biggest this month. The yield on Russia’s $3.5 billion of bonds due 2020 dropped eight basis points, or 0.08 percentage point, to 4.021 percent, the lowest since they first traded in April 2010.

Brent crude climbed as much as 0.5 percent to $124.28 a barrel after a report showed U.S. jobless claims held at the fewest since March 2008, signalling stronger demand in the world’s largest consumer of the commodity. Oil may rise next week as sanctions on Iran tighten, according to a Bloomberg News survey.

“The overall sentiment is bullish, and it was a holiday in Russia while the euro climbed above $1.33” yesterday, Yury Karpinsky, a currency trader at Renaissance Capital in Moscow, said by e-mail. “We followed market sentiment. All Eastern European currencies appreciated following the euro.”

Russia’s exchanges were closed for the Defenders of the Fatherland holiday yesterday.

Societe Generale SA, France’s second-largest lender, is recommending clients sell Israel’s shekel against the ruble and buy the Russian currency versus the Hungarian forint as protection against an upward shock to prices for oil, according to an e-mailed note from the bank today.

Flirting with $125

“As oil prices are now flirting with $125 per barrel, it is reasonable to start thinking about the potential impact on global emerging markets of an oil-price shock and the currencies likely to gain the most,” Guillaume Salomon, an emerging- markets fixed-income strategist at SocGen, wrote in the note. “Russia appears as the clear winner.”

The ruble was little changed at 39.20 per euro and strengthened 0.9 percent to 33.6917 against the central bank’s basket. Investors pared bets the ruble will weaken, with non- deliverable forwards showing the Russian currency at 29.5285 per dollar in three months, compared with expectations of 29.9385 per dollar yesterday.

Floating Corridor

Bank Rossii manages the ruble within a so-called “floating corridor” against a basket of dollars and euros to limit swings that erode exporters’ competitiveness. The central bank may be buying $150 million to $250 million in foreign currencies to slow the ruble’s advance after it passed through 33.87 against the basket today, Nikolay Podguzov, head of fixed-income strategy at VTB Capital in Moscow, said by e-mail.

RenCap’s Karpinsky said Bank Rossii may have stepped up foreign-currency purchases to about $250 million a day once the ruble appreciated beyond 33.70 against the basket.

Russia’s $2 billion of Eurobonds due 2015 rose, pushing the yield down 20 basis points to 2.411 percent, the lowest since they first traded in April 2010. Dollar bonds due in 2015 from OAO Sberbank, Russia’s largest lender, yielded 11 basis points less than yesterday at 3.9 percent, while the yield on similar- maturity notes issued by state gas monopoly OAO Gazprom dropped 19 basis points to 3.77 percent.

The cost of protecting Russian debt against non-payment for five years using credit-default swaps fell six basis points to 194 basis points, down from last year’s peak of 338 on Oct. 4, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

--Editors: Alex Nicholson, Peter Branton

-0- Feb/24/2012 06:38 GMT

-0- Feb/24/2012 07:28 GMT

-0- Feb/24/2012 07:31 GMT

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- Feb/24/2012 06:23 GMT


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