Best World Cup Promotion Units Steel Bond Rally in Five Months

Russia's bid to 2018 World Cup host football is driving the biggest bond rally in five months for most steel producers as the government prepares to spend at least 9.6 billion U.S. dollars and expanding stage airports and roads.

The yield on dollar bonds maturing in 2013, OAO Severstal, Russia's largest steelmaker, fell 5 basis points to 5.235 percent, adding to 26 from yesterday's drop point, the biggest drop since July. Advances in Evraz Group SA, the second largest steelmaker, boosted the performance of its bonds in dollars for 2015, the biggest drop in three days since May.

costs of borrowing relative to the U.S. Russia Treasury bonds fell and the benchmark Micex stock rose to the highest level since July 2008, after soccer governing body FIFA gave the world's most-watched sporting event in the country. The World Cup may be responsible for half of a percentage point of growth of gross domestic product of South Africa, hosts of this year, the finance minister said in July Pravin Gordhan.

"The World Cup will be a great support from the bonds of the names of steel, construction and transportation companies, to be played over the next three months," said Vladimir Gersamia, who helps manage more than $ 2 million at Threadneedle Asset Management in London. "The victory will lead to a large number of orders that has been lacking in the country."

13 Stadiums

Russia defeated a challenge from England and joint bids from Belgium and the Netherlands, Portugal and Spain. Your winning bid is committed Russia to build 13 stadiums and renovate three others. The government will make "significant improvements and capacity increases" in most airports serving the 13 cities receiving proposals, including Sochi, home of the Winter Olympics of 2014, according to the FIFA website. Russia's victory marks the third straight year of property in an emerging market this year after South Africa and Brazil in 2014.

The country will spend 300 billion rubles ($ 9,600,000,000) to build stadiums for the tournament, Prime Minister Vladimir Putin said yesterday afternoon after flying to Zurich to meet with Joseph Blatter, president of FIFA, the Federation Internationale de Football Association, soccer's world governing body,

The total cost can be as much as $ 500 billion and loans from the government because of increase of 15 percent of gross domestic product of 11 percent over the next three or four years, said Chris Weafer, chief strategist at UralSib Financial Corp .

"It's a boost for Russia's actions, bonds and investment for Russia," Weafer said in a telephone interview from London. "The news is very good for the names of steel, transport and construction companies, and establishing a specific timeline of six years to Russia to complete its infrastructure program."

The program will encourage Russia to boost joint ventures with companies through public-private call and attract more foreign direct investment, Weafer said.

'Look Greek

The costs of the risks that cause "high debt" if the government in its existing program for infrastructure projects over the next five years, said Luis Costa, emerging market debt strategist at Citigroup Inc. emerging in London.

"Look at the Greeks, that hosted the Olympic Games increased its debt, there was a big part of the debt of the Olympic Games," Costa said in a telephone interview yesterday.

The ruble strengthened 0.5 percent to 31.3169 per dollar by 15:40 in Moscow trading, heading for the biggest daily gain since Nov. 18. non-deliverable, or opinions that provide guidance to the expectations of currency movements and interest rate differentials and allow companies to hedge against currency movements, show the ruble at 31.5725 per dollar in three months.

The price of the ruble in the country due August 2016 rose, leaving the yield 2 basis points lower to 7.31 percent.

Default Swaps

The cost of protecting Russian debt against default by five-year credit-default swaps was little changed at 156 basis points, compared to a peak of 217 this year, according to data provider CMA. The contracts 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.

Swaps credit-default for Russia, rated Baa1 by Moody's Investors Service, the third lowest investment grade rating, cost 18 basis points more than the contracts in Turkey, classified as four levels lower than Ba2. Russia swaps cost as much as 40 basis points less on 20 April.

The extra yield investors demand to hold the Russian debt rather than U.S. Treasuries fell 12 basis points to 210 yesterday, according to JPMorgan Chase & Co. 's EMBI index. The difference compared to 142 for Mexico's debt with similar qualifications and 175 for Brazil, two steps that is rated below Baa3 by Moody's.

The yield spread call Russian bonds is 28 basis points below the average for emerging markets, compared to a 15 - month high of 105 in February, according to JPMorgan indexes.

"Decline of the Sea '

"The benefits of hosting the World Cup is a matter of perception than reality," said Kingsmill Bond, chief strategist at Troika Dialog, by telephone from London. Expenditure is a "drop in the ocean" compared with $ 1,200,000,000,000 Russia's economy, he said.

The victory may help stock indexes from Russia to other emerging markets than in up to 10 percent in the next three months, analysts at VTB Capital, the investment banking arm of the second largest lender in Russia, wrote in a report e-mailed today. The Micex has risen 20 percent this year compared with an increase of 13 percent for the MSCI Emerging Markets Index.

Actions based OAO Severstal Cherepovets and Novolipetsk Steel, Russia's largest steelmaker by market value, jumped more than 3 percent today, adding to yesterday's gains of 4.6 percent and 4.9 percent.

The yield on the Lipetsk-based Novolipetsk of 2,013 rubles fel1 21 basis points yesterday, the most since Nov. 11. Rouble bonds due 2016 of the Moscow-based OAO Mechel, the largest Russian producer of coal for steelmakers, rose, pushing the yield up 27 basis points to 7.42 percent.