Russia: a brief market watch

RUSSIA ECONOMICS - In Brief 30 Jan 2025 by Evgeny Gavrilenkov

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The ruble appreciated by 3.6% since the start of the year despite the drop in oil prices. The latter resulted from the market reaction to some of Mr. Trump’s statements, which called for OPEC to lower energy prices. In our view, the main reason for the ruble to strengthen was the repatriation of some export revenues, delayed in November-December due to the new sanctions against the Russian financial sector announced back then. Meanwhile, we see the ruble appreciation as having a temporary effect as the most recent sanctions (on the energy sector, announced in January) may reduce volumes of oil exports and lower revenues in the following months. Meanwhile, the increased discount for Russian oil may be a leading indicator of these changes. The main news on the fixed-income market was Minfin’s decision to tap several off-the-run issues of the long-term OFZs. The demand for these papers turned out to be strong, and the borrowers managed to raise more than R60 bln in one auction day, which became the best result since the start of the year. Interestingly, this tap pushed the curve up, as Minfin’s decision surprised investors. The further dynamics of OFZ yields will depend significantly on the CBR’s rhetoric. Many investors think the regulator would prefer to keep the key rate unchanged during its February meeting. However, this decision is not predetermined and will be affected by forthcoming inflation prints in the next few weeks. But even if the rhetoric switches into positive mode, the ongoing OFZ supply from Minfin limits the potential for yield compression, especially at the long end of the curve. In our view, investors can find the most attractive papers in the middle...