Ruble Rallies 2nd Day as Cease-Fire Holding Buoys Russian Bonds

//Ruble Rallies 2nd Day as Cease-Fire Holding Buoys Russian Bonds

Ruble Rallies 2nd Day as Cease-Fire Holding Buoys Russian Bonds

By | 2015-02-16T12:15:19+00:00 February 16th, 2015|More Top Stories|0 Comments

(Bloomberg) — The ruble rose for a second day as oil
traded above $60 per barrel and fighting in Ukraine subsided
following a cease-fire agreement.

The ruble strengthened the most against the dollar among
emerging-market currencies on Monday and government ruble bonds
advanced for a fourth day. The gains came even after the
European Union expanded a blacklist over Ukraine to include a
deputy Russian defense minister.

The latest cease-fire and climbing oil prices are buoying
Russian assets that have been battered by U.S. and EU sanctions
and the ruble’s 46 percent collapse last year. Previous halts in
the Ukraine fighting have failed to stick and after the latest
accord the government in Kiev and pro-Russian militants already
accuse each other of violations near the town of Debaltseve, a
key rail junction in the country’s east.

“The key factor behind ruble’s strengthening is the rise
in the oil price and positive sentiment toward Russia following
the peace talks,” Nikolay Zolotarev, head of the investment
department at OAO MDM Bank in Moscow, said in e-mailed comments.
“Market participants are really tired of negative news.”

The ruble rose 2.1 percent to 62.1850 versus the dollar as
of 1:01 p.m. in Moscow, the strongest since Jan. 12. Yields on
five-year ruble bonds fell 20 basis points to 13.15 percent,
taking the four-day drop to 63 basis points.

Brent crude was little changed at $61.45 per barrel after
surging 7.8 percent on Friday. Oil, which along with natural gas
contributes half of Russia’s state revenue, held gains after a
third weekly advance as U.S. companies slowed drilling and
Libya’s state oil company threatened to halt the African
nation’s production.

Oil Survival

“Brent trading above $60 is the main factor for Russian
markets as it means the economy can survive,” Andrey Vashevnik,
the chief investment officer at RB Investment Fund Ltd. in
Moscow, said by phone. “Nothing is clear about Ukraine. On the
one hand we’ve got sanctions, on the other the truce.”

Russia’s annexation of Ukraine’s Crimea region in February
last year and the sanctions and separatist violence that
followed have pushed relations with the EU and U.S. to a post-Soviet low and driven the economy to the brink of recession.
Optimism that last week’s deal will bring a lasting solution
contributed to the ruble’s best week of gains this year.

Stocks Overbought

After rallying 2 percent on Friday, Russia’s Micex Index
retreated from the highest level since April 2011 as a technical
indicator showed the gauge’s gains may be overdone. Of 50
shares on the index, 49 traded above the 50-day moving average
on Feb. 13, the highest proportion since January 2011, according
to data compiled by Bloomberg. The Micex traded down 2.3 percent
at 1,796.17 on Monday.

While fighting subsided along most of the front line of
about 400 kilometers (250 miles) in eastern Ukraine, the
standoff near Debaltseve emerged as the biggest threat to the
deal brokered by the leaders of Russia, Ukraine, Germany and
France. The militants demanded that Ukrainian troops surrender
the battleground town as the two sides traded blame for breaking
the cease-fire hours after it began.

“If oil directly leads to the ruble’s strengthening,
Ukrainian truce has more of a temporary nature,” Oleg Popov, a
money manager at Moscow-based April Capital Asset Management who
oversees about $500 million, said by e-mail. “Many investors
are highly skeptical of Ukraine peace efforts following 11
months of conflict.”

To contact the reporter on this story:
Ksenia Galouchko in Moscow at
kgalouchko1@bloomberg.net

To contact the editors responsible for this story:
Wojciech Moskwa at
wmoskwa@bloomberg.net
Alex Nicholson, Zahra Hankir