The yield on the Russian 10-year OFZ rose to the 11.9% mark in late August, the highest in 17 months, erasing the short respite for OFZ bonds as concerns of unsustainable fiscal deficits and a hawkish central bank regained investors’ forefront. Russia posted a budget deficit of RUB 2.8 trillion in the first seven months of the year, a record high, as increased war spending coincided with lower revenues in the state’s essential revenue streams. Urals oil prices edged above the G7’s price cap and triggered hesitance from key Indian customers, limiting buying from Russia’s largest oil importer this year. Additionally, China’s slowing economy further threatened the demand for Russian commodities, also pressuring key revenue sources. Consequently, Moscow heavily depends on bond issuance to finance its budget deficit, lifting yields. Also pressuring OFZ prices, accelerating inflation and a slide in the ruble drove the CBR to call an extraordinary meeting and deliver a 350bps emergency hike.
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 August of 2023.
The Russia Government Bond 10Y is expected to trade at 12.11 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 12.64 in 12 months time.