Russia: a brief market watch

RUSSIA ECONOMICS - In Brief 16 Jan 2025 by Evgeny Gavrilenkov

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A new wave of US sanctions was focused on the energy sector and caused new fears that the inflow of hard currency into Russia may decrease. As a result, the demand for hard currency increased, and the ruble moved well above USD/RUB 100 versus USD/RUB 99 at the end of 2024 (at the time of writing this note, the USD/RUB traded close to the 103 mark). It’s premature to judge how critical the damage will be for Russian foreign trade. However, the pressure over the ruble will likely persist in the short term. We suppose that volatility will be high in the coming weeks, especially amid forthcoming changes in the US presidential administration. However, from the fundamental point of view, a weakening of the ruble looks natural amid Russia’s high inflation. The first OFZ placement was relatively unsuccessful for Minfin, as it managed to sell bonds worth R10 bln only, which is 1% of the quarterly plan. Despite the CBR’s unexpected decision at the end of December to keep the key rate unchanged at 21%, investors demonstrated only moderate demand for fixed-rate papers. Many are cautious regarding further steps of the CBR and afraid of another hike as inflation remains high. Minfin also is not ready to offer high placement premiums and hopes for more favorable conditions later this year. We suppose that the amount of issuance in 1Q25 is unlikely to exceed R500 bln. In the last week of December, the weekly inflation posted no acceleration, and the 2024 yearly figure remained below the psychological 10% mark at 9.52%. However, this year, inflation climbed to 0.67% MTD in the seven days ending on January 13. Note that in January 2024, inflation m-o-m was 0.86%, i.e., inflation in the ...