Russia: a brief market watch

RUSSIA ECONOMICS - In Brief 17 Jul 2025 by Evgeny Gavrilenkov
The rally on the OFZ market continued, and the yield curve approached 14% in its long end (versus 15% two or three weeks ago). The CBR published its regular survey on the current economic trends, which indicated that current inflation “in annualised terms moved close to 4%”. This statement supported the market view that the regulator would continue rate cuts in July. Currently, investors expect the CBR to cut the key rate from 20% to 18% next Friday. Moreover, market participants are sure that this step is not the last one in the cycle, and by the end of the year, the rate will drop to 15-16%. As these expectations supported demand for bonds, Minfin raised more than R200 bln from placing fixed-rate papers in one auction day (on July 16). In addition, it pushes down interest rates on the money market, and RUONIA approached 19.2% (80 bps below the key rate). We suppose the market sentiment will remain the same at least until the next CBR meeting (July 25). Further developments will largely depend on the message that the regulator sends to the market. The FX market remains calm, as the USD/RUB rate hovers around the 78 mark, ignoring both external and internal factors. Interestingly, market expectations started to change. Even though the ruble rate appears excessively strong, many investors don’t rule out that it could remain at the current level for the next several months. Sooner or later, the ruble will move to economically justified levels, but currently, there are no obvious triggers that could push the market. In the seven days ending on July 14, weekly inflation fell to 0.02% w-o-w. A week earlier, it soared to 0.79% due to the indexation of regulated transport and...

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