Posted on March 7, 2012 - by Venik
Russian bonds out of favour
Analysts refuse to blame Putin election and point to holidays and high price guidance at auction
Investors shunned the first bond auction in Russia since Vladimir Putin claimed a resounding victory in the country’s presidential elections on Sunday.
The treasury sold just 8bn roubles (£170m) of a planned 45bn roubles worth of seven-year bonds at the auction on Wednesday.
Putin won the presidency with almost 64% of the vote but independent election monitors and opposition activists contested the result, offering evidence of widespread falsifications. The news prompted opposition protests, with 20,000 people gathering in Moscow’s Pushkin Square on Monday for an anti-Putin rally.
Investors dismissed suggestions that poor demand for the bonds was linked to the election result. Jerome Booth, head of research at emerging markets debt investors Ashmore, said rouble bond auctions tend to attract Russian investors, who have two days off at the end of this week for International Women’s Day.
“The holidays are coming up,” he said. “There’s low liquidity because they are not there, they’ve gone off for the weekend. It’s not to do with politics. The next one will probably be fine.”
The Russian bond market has had a strong run this year and some analysts said the government had aimed too high with the price guidance for this auction.
Manik Narain, emerging markets strategist at UBS, said: “Investors are becoming a bit more choosy about the levels at which they buy Russian bonds.”
A weaker rouble may also have spooked investors. The currency slipped 3% against the dollar in the past seven trading days.
Narain added: “We’re not very worried at this point. Certainly the election result was very rightly disputed. Will this lead to a breakdown in confidence in the markets? I really don’t think so.”
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