UPDATE 1-Russian rouble tumbles as imminent threat of U.S. sanctions resurfaces

(Adds debt sanctions details; repo)

MOSCOW, April 15 (Reuters) – The Russian rouble was down about 1.3% against the dollar after earlier losing 2% on Thursday, giving up gains made earlier this week as the threat of U.S. sanctions on Moscow reared its head again, with new measures expected imminently.

The United States may announce sanctions on Russia as soon as Thursday for alleged interference in U.S. elections and malicious cyber activity, targeting several individuals and entities, people familiar the matter said on Wednesday.

One source said aggressive new measures targeting Russia’s sovereign debt were expected.

By 0818 GMT, the rouble was 1.3% weaker against the dollar at 76.86, falling well away from the two-week high hit in the previous session and earlier losing more than 2% to 77.55.

It had lost 1.2% to trade at 92.02 versus the euro , earlier clipping a more than five-month low of 92.85.

Russia sovereign dollar bonds sold off as much as 3 cents on Thursday, with the 2047 issue falling to a 12-month low on sanctions fears.

Russia’s 10-year benchmark OFZ yields – a proxy for borrowing costs – hit 7.37% in the secondary market on Thursday, hovering around levels last seen a year ago and also reached in late March on geopolitical risks.

The Wall Street Journal, citing sources, said a ban on U.S. financial institutions participating in the primary market of Russia’s government debt would take effect from June 14.

If applied, those restrictions would be similar to an earlier ban on U.S. banks participating in the primary market for non-rouble denominated bonds issued by the Russian sovereign. Those sanctions do not restrict the buying of Russian Eurobonds on the secondary market.

Expectations of new U.S. sanctions also pushed up Russia’s sovereign five-year credit default swaps – the cost of insuring exposure to Russia’s sovereign debt – by 15 basis points to 120 basis points, according to IHS Markit data.

A phone call between U.S. President Joe Biden and his Russian counterpart Vladimir Putin on Tuesday had eased fears of imminent sanctions and the rouble was boosted by Biden’s proposal for the two leaders to hold a summit to tackle a raft of disputes.

The central bank said it would hold two repo auctions on April 19 but drastically lowered the limit on its one-month auction to 100 billion roubles ($1.3 billion), from 1.5 trillion roubles at the previous auction in March.

Brent crude oil, a global benchmark for Russia’s main export, was down 0.5% at $66.24 a barrel, adding to pressure on Russian stock indexes.

The dollar-denominated RTS index was down 2.5% to 1,453.6 points. The rouble-based MOEX Russian index was 0.8% lower at 3,547.7 points.

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