Russia: a brief market watch

RUSSIA ECONOMICS - In Brief 06 Nov 2025 by Evgeny Gavrilenkov

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The FX market remains steady despite the latest sanctions. Investors anticipate no significant changes in FX flows until November 21, when all operations with the two newly sanctioned Russian oil majors must be finalized. Some impact is expected toward the year's end, as increased discounts on Russian oil could lower exporters' revenues, potentially weakening the ruble in December. By increasingly relying on local currencies for foreign trade and largely eliminating "unfriendly" currencies, Russia has unintentionally managed to strengthen the ruble this year, an effect that was difficult to predict. However, an overly strong ruble poses challenges for the budget by reducing revenue tied to the exchange rate. The OFZ market responded positively to the CBR's decision to reduce the key rate by 50 bps at the end of October, with yields dropping 40-50 bps at the long end of the curve. Before this, investor expectations were almost evenly split between "no change" and "cut" scenarios. This decision is seen as a positive signal for the market. Additionally, the CBR kept its message neutral, leaving room for further rate cuts in the coming months. Investors expect the regulator to proceed cautiously, with potential steps capped at 50 bps. Even at this pace, OFZs remain one of the most appealing options in the local market. Due to the national holiday in early November, Rosstat has delayed the publication of weekly inflation figures by a couple of days. However, inflation seems to have remained steady over the past seven days, as no significant factors that might cause notable changes were identified. Previously, Rosstat reported that for the week ending October 27, w-o-w infla...