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Russian investors bank on bonds linked to consumer prices

Published Wed, Dec 9, 2015 · 09:50 PM

Moscow

RUSSIAN investors caught between an oil rout and a ban on Turkish food are finding a way out in one corner of the bond market: securities that bet that rampant inflation won't go away.

Notes indexed to consumer prices returned 1.2 per cent in the past month compared with declines of 0.4 per cent on nominal bonds and 7 per cent for the Russian currency. Credit Suisse Group AG advises that clients buy the so-called linkers over plain-vanilla debt.

"Recent headwinds from a weaker rouble and the economic sanctions on Turkey suggest to us that inflation breakevens are likely to continue to rise," Nimrod Mevorach, a strategist at Credit Suisse in London, said on Tuesday.

Appetite for the notes, whose payouts rise with consumer-price growth, is being driven by investors sceptical that the central bank can rein in inflation running at 15 per cent as the rouble slides and limits on Turkish imports make groceries more expensive. The Finance Ministry was offering 20.4 billion roubles (S$412 million) of linkers on Wednesday, which is expected to bring the amount sold since their July introduction …

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