The Russian rouble steadied near 105 to the dollar in Moscow on Monday, while OFZ treasury bonds returned to trading in volatile fashion as Russia looks to gradually resume operations on its financial markets.
The central bank held its key interest rate at 20% on Friday, after an emergency rate hike in late February, and said it would begin buying OFZ bonds when the Moscow Exchange resumed trading those papers on Monday, hoping to limit volatility.
By 1018 GMT, the rouble gained 0.3% to 104.48 against the dollar and had lost 0.4% to trade at 115.15 versus the euro.
In offshore markets, rouble bids were last indicated at 105.87 per dollar, having been as strong as 93.6 in earlier trade.
OFZ TRADING RESUMES
Prices on some rouble-denomated OFZ bonds tumbled by a third in pre-market trade before trading on the main session resumed at 1000 GMT, Moscow Exchange data showed.
The yield on Russia’s benchmark 10-year OFZ bonds, which moves inversely to prices, rose to a record 19.74% in pre-market trading, before settling near 13.3% in the main trading session where the central bank was expected to step in, Refinitiv Eikon data showed.
The central bank’s intervention on the market should provide extra liquidity to the banking system and help the bond curve adjust to the new environment, SOVA Capital said in a note, with short-term rates remaining close but above the current key rate of 20% and the curve being inverted.
Sales of OFZ bonds by non-residents, who used to own 19.1% of all such bonds as of early February, will not be authorized between March 21 and April 1, Moscow Exchange said on Monday.
Those investors will be able to conduct repo and derivative transactions and, when stock market trading resumes, buy securities to close their short positions, but not sell previously purchased securities, the bourse said.
Stocks and bonds last traded on the Moscow Exchange on Feb. 25. The central bank subsequently curbed trading as Western sanctions over events in Ukraine threw markets into turmoil.
The bank has yet to say when trading in instruments like stocks can resume, as it looks for ways to clear a backlog of transactions while avoiding a market collapse. But a limited number of financial market operations have been permitted to resume over the next two weeks .
Later on Monday, Russia’s lower house of parliament will discuss the nomination of Central Bank Governor Elvira Nabiullina for another term by President Vladimir Putin. ($1 = 104.8520 roubles) (Reporting by Reuters Editing by Mark Heinrich and Angus MacSwan)