Russia: a brief market watch

RUSSIA ECONOMICS - In Brief 05 Jun 2025 by Evgeny Gavrilenkov

---

The FX market remains strong despite some signs of unfavorable (for Russia) changes in geopolitical rhetoric. Apart from that, the FX market does not pay too much attention to the volatility of the oil market. The globally weakening dollar is another factor that keeps the ruble excessively strong. At this stage, we don’t expect any significant changes in the near term. The ruble could likely fluctuate around R/$80 in the coming week or two. The potential rate cut by the CBR is unlikely to be a game-changer for the market. At the same time, the equity market remains calm and trendless. Strong ruble and high domestic interest rates make shares unattractive in the eyes of local investors. The fixed-income investors are optimistic in anticipation of the CBR meeting this Friday. They expect either the start of the rate cut cycle or, at least, an indication of such a step in July. As a result, the demand for OFZs increased, and Minfin was able to place almost R200 bln on the primary auction on Wednesday. At the same time, yield compression (yields decreased by 70 bps since the beginning of May for 10Y papers) may finish soon. Low oil-and-gas revenues may widen the budget deficit further, which will require additional borrowings. This scenario seems quite likely if one takes into account OPEC’s desire to increase global oil supply. In any case, Minfin has to issue more bonds and will try to raise as much debt as possible whenever conditions appear favorable. In the seven days ending on June 2, weekly inflation print moderated further, having reached 0.05%. Rosstat split this number in a way that the MTD inflation on June 2 stands at 0.01%, while the YTD inflation climbed to 3...