The ruble is getting cheaper over the weekend, OFZ yields are in positive territory after the increase in the CBR rate

MOSCOW, July 21 (Reuters) – The ruble returned to its decline late on Friday and is testing session lows as a safe position was renewed for the weekend and news in the background as exporters trimmed an already meager supply of the currency.

The non-standard step of the CBR increase, combined with subsequent decisions of the regulator, had a minimal impact on the rouble, however, the tightening of monetary policy with signs of further increase in interest rates put pressure on the rouble public debt market.

At 17:45 Moscow time, the dollar/ruble was at 90.96 with tomorrow’s calculations, and the ruble is down 0.8% after previously weakening to 91.00.

At that time, the euro/ruble pair was trading at 101.04, and here the ruble is losing half a percentage point, having previously lost to 101.09.

Compared to the yuan, the ruble is up 0.4%, the quotation is close to 12.62.

Market participants admit that part of the current weakening of the ruble was provoked by the morning news about the intentions of the State Duma to extend the military age for citizens of the Russian Federation to 18-30, while earlier it was supposed to raise them to 21-30 from the current 18-27. In the afternoon, Russian President Vladimir Putin’s fresh statements on foreign policy may become an incentive to buy safe assets locally.

The Russian Central Bank on Friday, guided by the results of the board, decided to raise the main interest rate by 100 basis points to 8.50% pa, contrary to the consensus that expected a more modest step of 50 basis points, and also significantly raised the forecast of the average main interest rate.

Raiffeisenbank’s Grigory Chepkov noted that the signal for the future remains quite hawkish, as CBR head Elvira Nabiullina said during a press conference that given the published path forecast for the average key rate, raising the cost of the loan at subsequent meetings rather than maintaining it seems a more likely option.

The ruble public debt market showed a more significant reaction than the FX market to the decision and comments of the CBR – the near end of the sovereign debt yield curve is rising by 9-23 bps, the middle and far ends are moving away from the 11% mark per year.

“Until the market anchors expectations for a key rate high in a new uptrend cycle, OFZ will remain under pressure,” said Dmitry Monastyrshin of Promsvyazbank.

The Bank of Russia also announced today its intention to start selling/buying foreign currency related to investing funds from the National Welfare Fund (NWF) in ruble financial assets from August 1, in addition to regular interventions under the budget rule.

According to Yevgeny Suvorov from CentroCreditBank, this is “very good news for the ruble” – the daily volume of foreign currency sales will increase by 2.3 billion rubles per day (at the current exchange rate, the daily volume of such transactions is about USD 25 million).

At the same time, the relatively high level of oil prices and the tax factor continue to work in favor of the Russian currency.

Support for the ruble from Russian exporters could be revealed in the coming days, given the single tax payment on July 28, which includes MET, where commodity companies typically increase sales of export foreign exchange earnings in the domestic market.

“If exporters take a break from today’s trade, the strengthening of the national currency may be postponed to next week,” said Yegor Zilnikov of Promsvyazbank.

Brent Crude has been volatile this week, but at the same time is back above the $80/bbl mark today (currently up 1.2% to $80.56), Russian Urals exports have consolidated above the Western $60/bbl mark, current values ​​hover around the $65 mark .

(Moscow office)