The ruble stabilizes near 104 against the dollar, volatile OFZ bonds resume activity

A view shows Russian ruble coins in this illustrative photo taken March 25, 2021. REUTERS/Maxim Shemetov/Illustration

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March 21 (Reuters) – The Russian ruble stabilized near 104 to the dollar on Monday and OFZ Treasuries resumed their volatile course as investors watched Russia’s ability to service debt public and to pay the coupon of its Eurobond.

Around 12:22 GMT, the ruble gained 0.4% to 104.50 against the dollar and had lost 0.4% to trade at 115.23 against the euro.

The bond market was focused on clues about Russian state finances as the country seeks to gradually resume operations in its financial markets.

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Russia must pay a $65.6 million coupon to holders of its 2029 Eurobond on Monday, but the Finance Ministry has the right to pay creditors in rubles if they had asked to receive their interest in the currency Russian.

Yields on 2029 paper, which move inversely to their prices, stood at 43% from 4.5% a month ago before Russia launched what it calls a “special operation” in Ukraine.

Despite growing concerns over Russia’s ability to service its debt, it paid coupons on two dollar Eurobonds last week, meaning it avoided what would have been its first bond default. exterior in a century. Read more

OFZ TRADING SUMMARY

The central bank said it would start buying OFZ bonds when the Moscow Stock Exchange resumes trading in those papers on Monday, hoping to limit volatility, as it also kept its benchmark rate at 20% last week. after an emergency rate hike at the end of February. Read more

Prices of some ruble-denominated OFZ bonds fell by a third in pre-market trading ahead of the resumption of the main session at 1000 GMT, according to data from the Moscow Exchange.

But the central bank’s purchase of OFZ bonds prevented them from falling further, market participants said.

The central bank has launched offers for some of the OFZ series from 80 billion rubles to 120 billion rubles ($0.77-1.15 billion), asset managers at Locko Invest firm said in a note. .

“That’s a lot,” they said.

The yield on Russia’s benchmark 10-year OFZ bonds hit a record high of 19.74% in premarket trading, before settling at nearly 13.9% in the main trading session, according to data. data from Refinitiv Eikon.

Central bank intervention in the market should provide additional liquidity to the banking system and help the bond curve adjust to the new environment, SOVA Capital said in a note, with short-term rates remaining close to but above the rate. current manager by 20% and the curve being inverted.

Russian banks will be the main players in the OFZ market while non-residents will seek to exit the market where possible as papers, which foreign investors have been enjoying with attractive yields, have been excluded from global indices, a declared VTB Capital.

For now, sales of OFZ bonds by non-residents, who held 19.1% of all such bonds at the start of February, will not be allowed between March 21 and April 1, the Moscow Stock Exchange announced on Monday. .

These investors will be able to engage in repurchase and derivatives transactions and, when trading resumes, buy securities to close out their short positions, but not sell previously purchased securities, the exchange said.

Stocks and bonds were last traded on the Moscow Stock Exchange on February 25. The central bank subsequently curbed trade as Western sanctions over events in Ukraine threw markets into turmoil.

The bank has not yet said when trading in instruments such as stocks will be able to resume, as it seeks ways to clear a backlog of transactions while avoiding a market meltdown. But a limited number of financial market operations have been allowed to resume over the next two weeks.

Later on Monday, Russia’s lower house of parliament will discuss the nomination of Central Bank Governor Elvira Nabiullina for a new term by President Vladimir Putin.

($1 = 104.8520 rubles)

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Reuters Editing reporting by Mark Heinrich, Angus MacSwan and Chizu Nomiyama

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