An employee counts rouble banknotes at a small private shop in Krasnoyarsk, Russia. The rouble weakened to 66.42 against the dollar last week and the Micex stock index fell to 1,795.70 points.

Bloomberg
Moscow


Russian government bonds posted the biggest weekly decline since August after the downing of a warplane by Turkey increased geopolitical tension. The rouble ended a four- week advance.
Five-year government bonds erased last week’s rally as the yield on the notes surged 35 basis points in the period to 10.06% in the five days through Friday. The rouble weakened 2.5%, the fourth-worst performance in emerging markets, while the benchmark Micex Index slid 1.7%.
The downing of the Su-24 warplane in northern Syria soured optimism that the Paris terror attacks will lead to improved ties between Russia and the West. As the government prepares to impose economic penalties on Turkey, the slump in Russian assets is being compounded by falling prices for crude.
“Russian assets are pricing two things - further weakening of the oil price and open geopolitical issues with Turkey,” Vladimir Miklashevsky, strategist at Danske Bank, said by e- mail.
The rouble weakened to 66.42 against the dollar and the Micex stock index fell to 1,795.70. While bonds lost their position of the top-performing emerging-market debt this year to Nigeria, they have still handed investors a 22.4% return from the beginning of the year through Thursday.
The government has two days to develop economic measures to respond to Turkey’s action and the response may affect flights, trade and investment, while bilateral projects may be frozen or cancelled, Russian Prime Minister Dmitry Medvedev said on Thursday. Brent, which is used to price Russia’s main oil export blend, fell for a second day, declining 1.3% to $44.89 per barrel in London.
“This isn’t the first correction this autumn, but this time around the profit-taking is amplified by higher political risks,” Ivan Guminov, manager of fixed-income portfolios at Ronin Trust Asset Management in Moscow, said by e-mail. “Foreign investors are undoubtedly increasing the political-risk estimates after the incident with the shot-down Su-24.”
The rouble pared earlier declines after the Bank of Russia said it will resume auctions for 12-month repurchase agreements with foreign currency, raising the minimum rate by 50 basis points to the London interbank offered rate plus three percentage points. The central bank is resorting to the instrument to give comfort to lenders, Bank of Russia First Deputy Governor Ksenia Yudaeva told reporters on Friday in Moscow.
“Overall, we think that the decision will help to neutralise much of the potential negative impact on the rouble of upcoming repo maturities,” Bank of America Corp analysts, including Vladimir Osakovskiy, said.
The total amount outstanding in one-year foreign-currency loans stands at about $18.6bn, according to the central bank. Russian lenders have to repay $2.8bn in 12-month foreign-currency repos that they borrowed last year, the central bank’s press service said by e-mail in response to questions sent by Bloomberg News.