It is a good day for the Russian rouble, as it recovered from its lowest point so far this year. However, rouble-denominated treasury bonds levitated near a one-year low as the market prepared for the imminent U.S. sanctions against Russia.
As a reminder, Russian assets have under pressure since last week. People should keep in mind that Russia braces for a new round of U.S. sanctions over alleged election meddling. However, the Russian Federation does not agree with the position of the U.S.
Interestingly, at 09:00 GMT, the Russian rouble was 0.6% stronger against the dollar at 75.91 after reaching 76.98 in jittery trade, its weakest since mid-November.
It is worth noting that the rouble added 0.8% to 89.79 against the euro, hovering away from the 87 mark seen before the threat of new sanctions intensified.
As a reminder, U.S. President Joe Biden made important comments. According to Joe Biden, Russian President Vladimir Putin will pay the price. The U.S. is expected to impose sanctions in the nearest future. Sanctions could range from freezing the U.S. assets of Russians to curtailing Russia’s ability to issue sovereign debt.
Russian rouble and U.S. sanctions
It is not surprising that the threat affected Russian government bonds. Interestingly, yields on 10-year benchmark government OFZ bonds, which move inversely with their prices, were at 7.23% after jumping to 7.36% on Tuesday, their highest since last March.
Importantly, the sell-off prompted the finance ministry to cancel its weekly OFZ bond auctions on Wednesday. The ministry cited increased market volatility.
As a reminder, a sanction premium in the rouble has been on the rise since November. Also, its further increase can push the rouble 2-3% weaker from current levels.
Interestingly, if the market situation normalizes, the Russian ruble could firm to 73-73 versus the dollar.
It is worth noting that Russia’s month-end taxes cushion losses in the rouble as they prompt export-focused companies to convert their dollar revenues to meet local liabilities.
People should keep in mind that Brent crude oil is a global benchmark for Russia’s main export. It was up 2% at $62.10 a barrel, supporting Russian stock indexes after their losses of the past several days.
Importantly, the dollar-denominated RTS index was up 0.2% to 1,438.5 points. The rouble-based MOEX Russian index fell 0.1% to 3,464.2 points. It reached an all-time high of 3,602.18 early last week.