Russian companies face higher borrowing costs ruble in 9 months

Russian companies face higher borrowing costs ruble in nine months, compared with dollar debt that the central bank drains cash from the banking system.

The gap between yields on the benchmark ruble debt maturing in 2012 OAO Gazprom and its 2013 dollar bonds rose to 287 basis points, or 2.87 percentage points today, the widest since March 1, 1929 points basis in May. Rossii bank has reduced cash from the sale of at least 3.8 billion U.S. dollars of foreign currency this month, matching the amount of all of October, which was the highest in almost two years, first deputy chairman Alexei Ulyukayev said In an interview in Moscow in November 1924.

While the Bank rossii maintains interest rates at a record low 7.75 percent, its efforts to stop further depreciation of the ruble since September, the local cost of debt to Gazprom, the country's biggest company, OAO Mobile TeleSystems and Russian Agricultural Bank have affected four months maximum. Yields on government debt in rubles two years, known as OFZs, rose 10 basis points yesterday to 6.1 percent, the highest since June 9, compared with two-year U.S. Treasury at 0.54 percent.

"Reducing the amount of rubles out there means less money for local debt, so prices have eased," said Dmitry Dudkin, head of fixed income research at UralSib Financial Corp. in Moscow, in a telephone interview yesterday. rossii Bank interventions are "the equivalent of clearing large amounts of rubles, as if they no longer exist," he said.

Capital flight

The departures are harming the ruble and forcing the central bank to increase sales in foreign currency, the Bank Chairman Sergey Ignatiev said rossii finance committee of the Duma in Moscow yesterday. The central bank has more than doubled its estimate of capital flight this year to U.S. $ 22 million on 16 November. The outputs in the year to the end of October total about $ 21 billion, Ignatiev said this week.

Russia has achieved since 2005 ruble against a basket of dollars and euros to limit changes that erode the competitiveness of exporters in the nation. The controller allows the ruble to trade within a corridor called floating against the basket, changing the range of 5 kopeks each time interventions over U.S. $ 650 million.

The ruble fell 0.6 percent to 31.3975 per dollar at 1:30 pm in Moscow, extending a slide of 1.8 percent this month. It fell 0.3 percent to 35.9828 against the basket, which consists of about $ 55 euros per cent and 45 per cent. The floating row ranged from 32.8 and 36.8 on 13 October, after the band was extended to four rubles of three, Ulyukayev said in an interview on 24 November.

MTS, Russia Agricultural

The yield on the Moscow-based Gazprom's ruble two years reached 6.46 percent this week, the highest since July 1, while the dollar-denominated debt maturing in 2013 yielded 3.46 percent yesterday, a minimum of two weeks.

The average price of Russian ruble bonds listed on Micex has fallen 0.4 percent in November, bound for the biggest monthly decline since May, according to the CBI Micex index.

The gap between bond yields Mobile TeleSystems, Moscow-based 'ruble in 2018 and dollar bonds maturing in 2020 was the largest since Russia's largest mobile phone provider made the issuance of U.S. in June. The performance of the ruble reached 7.83 percent on Nov. 22, the highest since July 5.

Agricultural Bank Russian bonds rubles for February 2018 yielded 8.52 percent yesterday, the highest in eight months and 251 basis points more than the lender's debt to Moscow-based state dollars eight years, the biggest gap since March.

Bond sales

Companies are taking advantage of lower costs in dollars. Gazprom is selling $ 1 billion five-year bonds, a person with knowledge of the sale, said last week. VEB, state development bank in Russia, raised the same amount in denominations of 15 years on 10 November. OAO Lukoil, the country's largest independent oil company, issued $ 800 million 10-year bonds on Oct. 29.

The government may delay its first issuance of debt denominated in rubles abroad until "weak" market conditions decline, the Moscow-based OAO Gazprombank told clients in a note sent by email November 24 . Belarus postponed its debut sale of bonds under Russian ruble "indefinitely" according to a regulatory filing on Nov. 24.

Ruble bonds are declining, as a result of negative sentiment in global markets and a tightening of domestic liquidity, "said Elena Kolchin, head of fixed income products in the Renaissance Moscow Managers, which manages U.S. $ 1.5 billion in assets. "To limit the negative impact of the recent strengthening of the dollar in global markets, the central bank had to increase its assistance to support the ruble and the affected local liquidity."

"Attractive" Yields

The amount of rubles in the market will likely be boosted in the second half of December, the government spends the remaining funds of the budget before the end of 2010, according to Alexander Dotkin, a bond trader at the Bank Zenit in Moscow.

"The bonds to these current levels are attractive ahead of the usual liquidity at the end of the year," said Dotkin by email yesterday.

Russian government bonds in dollars slid yesterday, with the yield of bonds maturing in 2020 to 2 basis points to 4.87 percent.

The extra yield investors demand to hold the Russian government debt rather than U.S. Treasuries rose 10 basis points to 230 today, according to JPMorgan Chase & Co. 's EMBI index. The difference compared to 144 for Mexico's debt, which has the same rating Baa1 by Moody's Investors Service, and 181 for Brazil, which is rated lower than Baa3 two steps.

Default Swaps

The yield of Russian bonds is 27 basis points below the average for emerging markets, down from a maximum of 15 months from 105 in February, according to JPMorgan indexes.

The cost of protecting Russian debt against default by five years using credit-default swaps rose half a basis to 155.5 yesterday, according to data provider CMA. Swaps credit-default pay the buyer face value in exchange for the underlying securities or the cash equivalent of a government or a company fail to adhere to its debt agreements.

Russia credit-default swaps is 17.5 basis points more expensive than contracts in Turkey, classified as four levels below Ba2 by Moody's. Turkey was 40 basis points over Russia on 20 April.

In a signal source is tight rubles, Russian Ruoni, the average interest rate of 31 charged by banks to lend local currency to each other, reached 3.42 percent on Nov. 22, the highest since April 29 according to the Bank rossii.

Capital controls

The amount of Russian lenders have in deposit accounts and correspondent central bank, another indicator of liquidity, was 827 billion rubles ($ 27 billion) yesterday, down from 1.1 trillion rubles early October.

Political leaders canceled a bond auction central bank designed to mop up excess rubles in the market yesterday. Rossii Bank has held only a sale of the call rossii Obligatsii Banka, or OBRs in November, the scrapping of the weekly auctions set for November 11 and 18.

While Brazil and South Korea are imposing capital controls to curb the appreciation of the exchange, Russia is exploiting the reserves of the third-largest in the world to avoid defeat in the ruble as companies pay foreign debt and economic growth lagging behind encourages investors to flee the country. Russia's international reserves, second only to stocks in China and Japan, have fallen 14.4 billion U.S. dollars from a high of 503.7 billion U.S. dollars on 15 October, rossii Bank said yesterday.

Russia sold $ 3.2 billion and € 437,600,000 ($ 584,000,000) in October to prop up the ruble, the highest since January 2009, according to central bank data published on November 8. Rossii Bank has been selling an average of $ 325 million of foreign currency per day in November, Aurelija Augulyte, emerging markets analyst at Nordea Bank AB, said by telephone from Copenhagen yesterday