Bloomberg News

Russian Bond Yields Advance on Oil Drop; Ruble Rallies to Dollar

July 10, 2012

Yields on Russia’s domestic debt rose for the first time in four days as oil, the country’s main export, declined. The ruble appreciated against the dollar and the euro.

Russia’s 138 billion rubles ($4.2 billion) of local OFZ bonds due July 2015 fell, increasing the yield by two basis points, or 0.02 percentage point, to 7.41 percent. The ruble weakened as much as 0.2 percent before trading up 0.3 percent at 32.895 per dollar by the close in Moscow.

Brent crude slumped 1.6 percent to $98.73 per dollar after Norway ended an energy strike that threatened to halt production by western Europe’s largest crude exporter and China curbed purchases of the commodity. Oil and gas together provide about 50 percent of Russia’s state revenue, according to the government’s estimates.

“The current strengthening of the ruble is artificial,” Igor Akinshin, a Moscow-based currency trader at Alfa Bank, said by e-mail. “Oil quotes are still very weak and I don’t believe in the continuation of this temporary trend.”

The currency may be rallying after last week’s 1.2 percent loss against the dollar was seen as overdone, he said.

Renaissance Capital cut its forecast for the average ruble rate against the dollar this year by 10 percent to 32.5, the Moscow-based brokerage said in an e-mailed note today. The ruble has traded at an average 30.7238 per dollar this year, data compiled by Bloomberg show.

Current-Account Deficit

“The key to a structurally weakening ruble is the expected fundamental transition to a current-account deficit that we expect over the next couple of years,” Ivan Tchakarov, the brokerage’s Moscow based chief economist for Russia and the Commonwealth of Independent States, said by e-mail. “In 2000 the current-account surplus was 18 percent of gross domestic product, in 2005 10 percent, this year probably 3 to 4 percent, so the trend is quite clear.”

The Russian currency will average 34.2 against the dollar next year, RenCap said.

The ruble strengthened 0.5 percent to 40.3475 per euro and 0.4 percent to 36.2486 against the central bank’s target dollar- euro basket. Investors pared bets on the currency weakening, with non-deliverable forwards showing the ruble at 33.3628 per dollar in three months, compared with expectations of 33.4975 per dollar yesterday.

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


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