UPDATE 1-Russian rouble slips despite strong demand at OFZ auctions

(Updates prices, adds OFZ auction result)

By Alexander Marrow

MOSCOW, May 13 (Reuters) – The rouble fell slightly against the dollar on Wednesday, supported by strong demand at Russian treasury bond auctions, but buffeted by volatile oil prices as the coronavirus outbreak continued to hang over global markets.

Federal Reserve Chair Jerome Powell warned of prolonged weak economic growth in the United States and OPEC slashed its oil demand forecast, but the rouble remained largely resilient, also benefiting from continued foreign currency interventions by the central bank.

Against this mixed backdrop, the rouble has no means of clearing the boundary of 73-75 against the dollar this week, Bank Saint Petersburg analysts said in a note.

By 1528 GMT, the rouble was 0.2% weaker against the dollar at 73.86 and had lost 0.1% to trade at 80.03 versus the euro.

Expectations of a central bank rate cut in June pushed OFZ treasury bond prices to record highs on Tuesday, with the yield on the benchmark 10-year OFZ falling to 5.86%, an all-time low. The central bank cut the rate by half a percentage point to 5.5% in late April.

The Russian finance ministry offered two series of OFZ bonds, maturing in 2025 and 2035, enjoying strong demand, usually seen as a gauge of investors’ sentiment towards Russian assets.

“On placement days, the rouble tends to strengthen,” said Andrei Kochetkov, leading analyst at Otkritie Brokerage.

The rouble was also buttressed by continued central bank daily foreign currency sales, although they declined to the equivalent of 14.7 billion roubles ($199.52 million), down from around 20 billion roubles earlier last week.

The state FX sales, which the central bank reports with a two-day lag, are pegged to prices for oil, an export vital to Russia’s economy. Global benchmark Brent crude futures were 0.9% lower at $29.73 a barrel.

Russian stock indexes were down.

The dollar-denominated RTS index was down 2.1% to 1,113.9 points. The rouble-based MOEX Russian index was 1.2% lower at 2,611.0 points.

Russian lender TCS Group reported a rise in first-quarter net profit by 26% year-on-year and said it expected to remain profitable in 2020, despite removing its guidance for the year. Shares in the group were up 0.4% in London.

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