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. Last Updated: 07/27/2016

Russian Bonds a Picture of Emerging Market Stability

LONDON — Russian debt, long seen as highly volatile in times of crisis, has become more stable in the current emerging-market turmoil thanks to hefty Central Bank reserves built on high oil prices, analysts said Friday.

Emerging markets have been volatile in recent weeks on sharp gyrations in U.S. equity prices and rumbling crises in Turkey and Argentina.

Yet Russian bonds, which have wobbled in previous emerging-market crises, have been relatively stable.

Last November, Russia's 30-year bonds felt price swings of 11 percent as Argentina warned of debt service problems. Last month, as problems mounted in Turkey, the same bonds moved only 5 percent. During the same episodes, Argentina's benchmark FRB Brady bond swung by 4 percent and 5 percent.

"Although the president [Vladimir Putin] reshuffled the Cabinet, and there was a sell-off in [volatile] countries, Russia was really stable," said Michael Ganske, at Deutsche Gesellschaft Fuer Wertpapiersparen.

Russia's benchmark 30-year dollar global stayed in a one-point price range between 40 and 41.

At the peak of previous crises, Russian bonds hit spreads over 1,150 basis points over Treasuries. Now, they are inside of 1,100 over, said Goohoon Kwon, senior sovereign strategist at ABN Amro bank.

"It is down to oil and reserves at this stage," said David Riley, emerging market strategist at UBS Warburg in London. "It is clear that there is no refinancing need, and reserves are very strong," he said.

Russia, profiting from high prices for the oil that is a mainstay of its export earnings, has built up Central Bank reserves of $29.7 billion as of March 30, up $14.2 billion year on year.