The yield on the Russian 10-year OFZ was over the 15.7% mark in January, its highest in nearly one month, amid ample supply of government bonds, lower demand for Russian assets due to sanctions, and an aggressive tightening cycle by the Bank of Russia. Surging inflation due to a plunging ruble, a labor-force crisis, and altered supply chains in response to sanctions drove the central bank to deliver 13.5 percentage points in rate hikes in the year. Throughout policy statements, the central bank noted that expansionary fiscal policy and the large-scale military spending by the Kremlin contributed to inflation in Russia, financed in part through record levels of OFZ issuances through auctions. Still, the yield on OFZs eased through December after the CBR held its key rate in the final meeting of the year instead of market expectations that ranged between 200bps-300bps hikes, amid reports of pressure from the Kremlin and business owners.
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