Russian 10-year bonds yield inches down on weak unemployment figure

The Russian 10-year bonds yield plunged on Wednesday, as investors pour into safe-haven assets amid deepening economic growth fears after reading weak unemployment figure. The yield on the benchmark 10-year bonds, which moves inversely to its price, moved down 0.11 pct to 9.170 pct and the yield on the 3-year bonds fell 0.32 pct to 9.430 pct by 1145 GMT.

The Russia's March unemployment rate rose to 6 pct, higher than the market expectation of 5.9 pct, from lower 5.8 pct in February. According to State Statistical data, Rosstat, nearly 4.6 million people were unemployed, as compared to 4.4 million in the previous month, pressurising Central bank of Russia for further monetary easing.

On the other hand, the Central Bank of Russia first deputy Governor Ksenia Yudaeva said that Central bank of Russia (CBR) will bring down the inflation figure to its target of 4% in 2017 as its strict monetary policy has already reduced inflationary expectations.

In addition, the CBR is widely expected to keep the policy steady at its next board meeting on April 29 and start monetary easing later this year. Also, the Russia’s GDP dynamics (seasonally adjusted) was flat in February 2016, as compared to 0.1% contraction in January, according to the monthly monitoring published by the Economic Development Ministry.

The investors will now focus on the upcoming February retail sales figure on Wednesday (1600 GMT), which is anticipated to decline 5.5 pct y/y, as compared to prior 5.9 pct y/y.

“Retail sales growth will likely improve slightly to -5.4% in yoy terms versus -5.9% yoy in February, corresponding to 7.4% mom nsa growth in the retail turnover – but still a soft spot in general”, added Societe Generale.

Lastly, if unemployment, inflation and GDP growth fail to improve over the coming months, easing will occur sooner rather than later, pushing bonds prices further up.