Oil Dragging Putin Back to Bond Sales as 20% Yields Seen - Bloomberg

Oil Dragging Putin Back to Bond Sales as 20% Yields Seen - Bloomberg:



"The days when Russia could comfortably cancel weekly bond auctions are coming to an end as crude oil tumbles toward $40 a barrel.



While the Finance Ministry scrapped the first sale of the year yesterday, citing “unfavorable market conditions,” the government will eventually need to start selling short-dated debt at yields as high as 20 percent if crude prices stay depressed, according to Raiffeisen Capital. The rate on five-year ruble notes jumped 2.19 percentage points this month, the most in emerging markets, as oil slumped to the lowest since 2009.



The surge in Russian borrowing costs -- the result of the plunging ruble, sanctions over Ukraine and plummeting oil -- prompted the ministry to pull four auctions in December alone. With the economy verging on a recession amid a stand-off over President Vladimir Putin’s actions in Crimea and east Ukraine, the budget deficit will increase to 3 percent of gross domestic product this year, Finance Ministry data show."



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