The usual weekly auctions of OFZ treasury bonds by the Russian Finance Ministry on Wednesday are canceled “to facilitate the stabilization of the market situation,” the ministry said on Tuesday, according to Finanz.ru.
The move comes after a sharp drop in the value of the ruble and a bearish debt market amid the global coronavirus outbreak. The ruble dropped to its lowest levels in five years last week.
Last week, quotations of Russian government bonds fell sharply amid the sale of risky and commodity assets around the world: the yield on 10-year OFZ securities jumped by 61 bps. and exceeded 6% per annum.
On Friday, the RGBI index, which tracks OFZ prices, collapsed by 1.58%, showing a record drop from the 2014-15 crisis. Foreign investors began to sell government securities, holding a third of all bonds in their hands, analysts at Sberbank CIB wrote. According to VTB Capital, non-residents withdrew about 70 billion rubles.
OFZ market experienced a “bloodletting”, says Ivan Guminov, the main portfolio manager of Ronin Trust in Moscow: bond prices have been rising almost non-stop since the summer of 2018, and Friday’s sale took off the overbought and allowed “to let off steam”.
Following the prices of public debt, the ruble rapidly weakened: the dollar reached the level of 67.7 for the first time since January 2019, and the euro touched 75 rubles, setting a record for the year. Over 7 trading days, the European currency went up by 6.33 rubles, and the American – by 3.91 rubles.
“Foreign investors are nervous now,” explained Finance Minister Anton Siluanov on Friday, diplomatically stating that “demand for paper has somewhat decreased.”