The yield on the 10-year Russian OFZ extended its decline to the 8.7% mark, the lowest in over 6 months, as lower consumer prices and a strong ruble ramped up bets of looser policy by the CBR, while investors digested Russia’s default on its sovereign debt. Sanctions blocked Russia from transacting international payments to foreign debt holders through Western institutions, triggering a default on the $100 million in Eurobond coupons that were due May 27. While its immediate effect on OFZ instruments is limited, the default should hamper Russia’s ratings and access to credit in the future. Meanwhile, weekly price data pointed to a deflated CPI for the third consecutive week amid slowed consumer demand, while a plunge in imports and higher commodity prices lifted the ruble to 7-year highs despite the relaxed capital controls by the central bank. In its last meeting, the CBR cut its key rate by 150bps to bring it back to the pre-invasion level of 9.5%.
Historically, the Russia Government Bond 10Y reached an all time high of 19.89 in March of 2022. Russia Government Bond 10Y - data, forecasts, historical chart - was last updated on June of 2022.
The Russia Government Bond 10Y is expected to trade at 8.94 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate it to trade at 9.65 in 12 months time.