Russia: a brief market watch

RUSSIA ECONOMICS - In Brief 19 Dec 2024 by Evgeny Gavrilenkov

The FX market remained volatile, and in the past two weeks, the ruble fluctuated within the range from USD/RUB 99 to USD/RUB 106. Chances to see the ruble close to the upper boundary by the year-end are high. These developments fueled demand for bonds nominated in hard currency. Since the beginning of December, the yield for long-term papers compressed by more than 100 bps. It happened despite the appearance on the local market of about $20 bln in sovereign bonds, issued due to the substitution of Eurobonds, placed earlier on the international market. We suppose that yields for these papers (nominated in USD) may move down further to 7-8% (from 9-9.5% at the moment), which will create solid grounds for the strong performance of the corporate bonds. Minfin placed R2 trln in floating-rate bonds in two auction days and increased the execution of its borrowing program to 99%. The main buyers of these papers were large commercial banks. According to the media, VTB bought about 34% of the issue during the first auction. We suppose that Minfin will refrain from aggressive borrowings in the coming couple of months and wait for more comfortable conditions. So far, the market expects the CBR to hike the key rate to 23% (due on December 20). Despite that, yields for long-term OFZs remain more or less stable. The latter confirms that investors expect the regulator to start monetary policy easing in 2025. In the seven days ending on December 16, weekly inflation remained high (0.35% w-o-w). The MTD and YTD tallies moved to 0.97% and 9.14%. Inflation climbing to 10% by the year-end looks imminent. Hence, the key rate hike is also imminent. Prices rise across the board, including for...

Now read on...

Register to sample a report

Register