Russian bond yields spike as trading resumes after month-long pause

Some Russian assets returned to trading on Monday after almost a month on the sidelines, with bidding on OFZ government bonds open for limited hours on the Moscow Exchange.

The Central Bank of Russia announced on Friday that trading in federal loan bonds would resume on a discrete auction basis between 10 a.m. and 11 a.m. Moscow time on Monday, and in the usual format between 1 p.m. and 5 p.m (10 a.m. and 2 p.m. GMT). Trading in such instruments had been halted for three weeks.

Yields on the benchmark 10-year OFZ ruble treasury bonds spiked to 19.7% in early pre-market trade, an all-time high, but had settled to around 14% by the end of the trading session.

"For other instruments, trading on the Moscow Exchange will take place in a mode similar to that established on March 18, 2022," the central bank added.

The CBR held its key interest rate at 20% last week after more than doubling it in an emergency rate hike in late February, following Russia's invasion of Ukraine. The Bank said Friday that it would begin purchasing OFZ bonds when the Moscow Exchange resumed trading them on Monday, in a bid to mitigate recent volatility in Russian asset markets.

In a separate statement, the CBR added that "purchases will be made during the time it takes to complete the adjustment of the prices of financial instruments to the new conditions."

The Russian stock market has been closed since Feb. 25 as stocks plummeted in light of the invasion and subsequent barrage of Western economic sanctions. The CBR has yet to confirm when equity trading can resume, as a backlog of transactions will need to be cleared. However, a number of additional financial market operations will be allowed to resume over the next two weeks.

The Russian ruble was trading at just over 104 to the dollar on Monday afternoon in Europe.