Russian bonds rally on strong oil prices, Yellen’s speech

The Russian bonds jumped on following strong cues emerging from crude oil prices, pushing the yield on 10-year bonds down 10 bps. Moreover, the  Brent crude oil, a global benchmark for Russia's main export, was lifted today by a weaker dollar after Federal Reserve chief Janet Yellen signalled a cautious approach to US interest rate hikes, but the rises were tempered by worries about a supply glut.

Apart from this, Russian Finance Ministry has announced that the auctions for three issues of federal loan (OFZ) bonds totaling 26.9 bln rubles ($393.8 mln) on March 30.

“Series 24018 variable-coupon OFZ bonds with the par value of 9.33 bln rubles ($136.6 mln) will be mature on December 27, 2017. Series 26217 fixed-income OFZ bonds with the par value amounting to 13.6 bln rubles ($199.3 mln) will be mature on August 18, 2021,” the ministry said in its report.

The third auction will be held for Issue 52001 inflation-pegged OFZ-IN bonds amounting to 3.95 bln rubles ($57.9 mln) and mature on August 16, 2023.

In addition, the Bank of Russia’s unexpectedly hawkish turn at its last rate meeting and the slump in oil prices are casting a shadow on the Russia long-term debt. Morgan Stanley in its report said that if oil prices continue to weaken, the rate on 10-year notes will climb by 50 basis points.