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. Last Updated: 07/27/2016

Soaring Yields Add To Gloom




Russia's financial market took a fresh hit Monday with treasury bill yields touching 90.11 percent -- 10 percentage points above the Central Bank's refinancing rates -- and equities plunging 5 percent, amid lack of news over the IMF's multibillion dollar bailout package to Russia.


"There's no sign of any improvement on the [government's] fiscal situation, so that's why yields have gone up," Tom Brackenbury, an analyst at the Rinaco Plus brokerage, said.


Moscow is currently negotiating a $10 billion to $15 billion rescue package with the International Monetary Fund to end Russia's worst economic crisis since the collapse of the Soviet Union, and stave off financial collapse.


Traders said that another reason for Monday's sharp drop in GKO prices could be that banks tied to gas giant Gazprom are selling of their government debt portfolios to raise cash to pay off Gazprom's tax arrears.


Bankers said primary dealers cannot support the market, as funds on correspondent accounts have shrunk by 1.5 times since the end of last week, according to Central Bank figures.


Dealers said banks, starved of liquidity, focused activity on sales of short-term paper. OFZ bond yields fluctuated around 79 percent to 84 percent.


The soaring yields added to the stock market gloom. "When t-bill yields are close to 100 percent, it's not worth waiting for domestic funds to come to the shares market," said Olma investment company bourse chief Vadim Tutarashvili.


The Moscow Times index closed down at 104.62 points, down 5.06 percent, on turnover of $22.18 million.


"The Rosneft auction result was obviously negative and probably not completely absorbed on Friday," Brackenbury said, referring to the decision by Shell to pull out of the bidding for the last Russian oil major to be privatized.


Analysts said the move increased chances that the auction could fail a second time, and rob the cash-starved Russian government of $1.6 billion in receipts as it struggled to close a huge hole in its budget.