This past week on the currency market was marked by a continual weakening of the dollar. The American currency lost 30 kopecks and fell below the psychologically significant level of 30 rubles to the dollar. The ruble continues to grow thanks to the recent increase in Russia’s sovereign rating to the investment level. The dollar was also at a disadvantage due to high oil prices. The Central Bank stayed away from trading and only presented indicative bids for purchasing hard currency. The ruble also benefited from tax time. Ruble resources again increased in value and the short-term IBC rate reached 10-12%. “The market was dominated by a stronger ruble, and there is no reason to expect the dollar to stop falling in the near future,” believes Svetlana Khorlina, Director of Currency Management at Lefko Bank.
The GKO-OFZ bond market saw a modest downward turn with light trading. Investors were in no hurry to sell their securities, hoping for an increase in quotes in the not-so-distant future. There were also no buyers to be found. The OFZ-GKO auction for a total of 5 billion rubles scheduled for the middle of the week was not held due to insufficient bids. According to Mikhail Avtukhov, Director of the Government and Corporate Bonds Operations Division at Guta Bank, there is a slight chance for increased prices should ruble liquidity improve and the ruble continue to grow stronger. However, no significant decrease in yields will occur in the near future.
After two weeks of dramatic growth, the sub-federal and corporate bond market saw profit fixation, leading to a 0.5% decline in prices for the market as a whole. The leaders in terms of sales were Moscow municipal bonds. They grew as the issuer’s rating was raised to the investment grade, just like Russia’s. The yield on Moscow bonds increased on average from 9.3% to 9.7% p.a. “Over the next week, the market will be defined by end of the month effect for the most part. The demand for rubles to pay taxes will increase their value and possibly put pressure on ruble securities markets,” says Anastasia Shamina, an analyst at Zenit Bank.
Traders on the foreign debt market were in a pessimistic mood brought about to a large extent by falling quotes for US bonds. Only toward the end of the week did the price of Russian bonds increase slightly. “Two opposing factors will influence the situation in the future. On one hand, as Western funds reexamine their limits on acquiring Russian bonds in light of Russia’s improved rating, prices could rise. On the other hand, if the US economy starts to exhibit strong growth, the yield on American and thus on Russian bonds will begin to grow,” explains Alexander Zhuravlev, Head Dealer with Dialog Optim Bank’s Securities Department.
In the beginning of last week, the Russian stock market continued to grow. On Monday morning, the RTS reached yet another record high of 650 points. However, the worsening conflict between the Kremlin and YUKOS led to widespread profit fixation, especially in oil stocks. “Apparently, certain state authorities want to prevent YUKOS-Sibneft from selling part of the company to Exxonmobil. Regardless of who wins, this conflict will have extremely negative effects on the stock market,” fears Yuri Makeyev, an analyst at IT Invest. YUKOS, Tatneft, and Sibneft lost over 10% by the end of the week. Only Rostelekom saw a speculative growth of 0.6% on the eve of its financial report.

The Financier’s Date Book

October 31 RAO EES Board of Directors meets
October Svyazinvest releases its consolidated reporting for 2002 according to international standards and Aeroflot publishes its results for the first nine months of 2003
October-November Uralsvyazinform releases its third quarter results according to the Russian Accounting Standard