Russia Bond Sales Fail as Ruble to Micex Drop on Ukraine Tension
Russia scrapped bond sales for the
seventh time in eight weeks as investors demanded higher yields
after the U.S. said the country wasn’t taking steps to de-escalate the crisis in Ukraine.
The Finance Ministry canceled the sale of as much as 10
billion rubles ($280 million) of nine-year ruble securities and
the same amount of five-year notes because there were no bids at
acceptable prices, according to a statement on its website. The
Micex Index (INDEXCF) of equities declined for a third day Russia’s
benchmark bonds dropped.
The pro-U.S. government in Kyiv is considering a new push
to dislodge militants in the Russian-speaking east of the
country, while Russia’s Foreign Minister Sergei Lavrov said
Moscow would respond if it’s interests were attacked in Ukraine,
undermining an April 17 accord to reduce tension in the region.
Yields on the government’s benchmark 2027 ruble bonds have risen
80 basis points since President Vladimir Putin’s incursion into
Crimea started on March 1.
“They decided to test the market and the market wasn’t
responsive,” Vladimir Miklashevsky, a strategist at Danske Bank
A/S in Helsinki, said in e-mailed comments. “A rather expected
development given the geo-political turmoil.”
Russia’s main equities gauge slid 0.7 percent to 1,326.54
at 3:15 p.m. in Moscow. The yield on ruble-denominated debt due
February 2027 increased six basis points to 9.16 percent while
the ruble weakened 0.2 percent to 41.8824 against the central
bank’s target basket of dollars and euros.
Ukraine Focus
The U.S. and its European allies have threatened to ratchet
up sanctions on Russia if it doesn’t act to defuse the
confrontation in eastern Ukraine. In a call yesterday with
Lavrov, U.S. Secretary of State John Kerry voiced concern “over
the lack of positive Russian steps to de-escalate” the crisis,
according to a State Department release.
“Investors are dedicating all of their attention to
Ukraine,” Yuri Selyandin, a fund manager who helps oversee
about $2 billion at GHP Group in Moscow, said by phone. “We’re
not seeing any positive development.
The situation on the markets may not stabilize before
Ukraine holds presidential elections on May 25, with the U.S.
reiterating that it may introduce new sanctions against Russia,
Selyandin said.
The spike in borrowing costs has deterred Russia from
selling bonds as the weaker ruble and higher oil prices boost
public revenue, offsetting the need to sell debt.
More Sanctions
Ukraine’s government is doing its part to uphold the Geneva
accord and ‘‘Russia needs to comply with the commitments it
made” or face more sanctions, White House spokesman Jay Carney
told reporters traveling with U.S. President Barack Obama
yesterday. A decision to impose additional penalties may be made
in the “coming days,” he said.
OAO Magnit, the nation’s biggest food retailer, fell 1.5
percent to 7,566.60 rubles. OAO Gazprom, the nation’s biggest
natural gas producer, declined 1.2 percent to 130.18 rubles.
Magnit yesterday posted a 9.1 percent margin on earnings
before interest, taxes, depreciation and amortization in the
first quarter. That’s a decline from 9.3 percent in the same
quarter last year.
Equities on the Micex trade at 4.8 times estimated
earnings, the cheapest valuations among 21 developing countries
monitored by Bloomberg.
Russian companies are set to pay as much as 485 billion
rubles in taxes this week, including as much as 240 billion
rubles in mineral extraction levies, potentially boosting demand
for the local currency.
The ruble is the second-worst performer this year among 24
developing-country currencies monitored by Bloomberg, having
declined 8 percent against the dollar. It was little changed
versus the greenback at 35.71 and 0.3 percent weaker against the
euro at 49.4290.
To contact the reporters on this story:
Ksenia Galouchko in Moscow at
kgalouchko1@bloomberg.net;
Vladimir Kuznetsov in Moscow at
vkuznetsov2@bloomberg.net
To contact the editors responsible for this story:
Wojciech Moskwa at
wmoskwa@bloomberg.net
Daliah Merzaban