Russia canceled its fifth ruble-bond auction in a row after the government’s borrowing costs reached the highest in almost five years earlier this month.
The Finance Ministry pulled tomorrow’s sale, citing “unfavorable market conditions” in a statement on its website. The yield on the 10-year government ruble bond reached 9.9 percent on Aug. 8, the highest since October 2009. It added eight basis points to 9.36 percent as of 1:49 p.m. in Moscow, increasing for a second day after falling as low as 9.27 percent on Aug. 15.
Russia has skipped 13 auctions this year as President Vladimir Putin’s standoff with the U.S. and its allies over Ukraine and the threat of tougher sanctions triggered a sell-off in the nation’s assets. The ministry voided four other sales where bidders sought higher yields than it was ready to offer. Borrowing costs climbed this week after four-way talks to halt fighting in Ukraine reached an impasse in Berlin.
The yield on the government’s local-currency securities maturing in February 2027 is trading 140 basis points above the central bank’s key interest rate, which it raised by 50 basis points, or 0.5 percentage points, in a surprise move on July 25. The spread was 124 basis points the last time the ministry said it would proceed with a local bond auction on July 15.
Russia has raised 124 billion rubles ($3.4 billion) this year from selling the local bonds, known as OFZs, and has placed 100 billion rubles in untraded government savings bonds, known as GSO, with the Pension Fund.
The government, which initially planned to raise 808 billion rubles in 2014, won’t sell bonds when borrowing costs are too high, Finance Minister Anton Siluanov said April 1.
“Overall, the federal budget is in good shape this year and, if oil prices hold at $101 per barrel until the end of the year, there will be no pressure in the primary market,” Maxim Korovin and Anton Nikitin, analysts at Moscow-based VTB Capital, said in an e-mailed note before the announcement.
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