April 10, 2019 / 3:48 PM / 5 months ago

UPDATE 2-Russia sells $2.13 bln in OFZ bonds, pushing rouble to two-week highs

(Adds second OFZ auction, comment, updates prices)

MOSCOW, April 10 (Reuters) - The Russian rouble hit a two-week high versus the dollar on Wednesday after the finance ministry sold a record volume of OFZ treasury bonds, which are seen as a gauge of global market sentiment for Russian assets.

After having opened stronger against the dollar, the rouble climbed further to reach 64.42 against the greenback , its highest level since March 27, after the two OFZ bond auctions by the finance ministry.

Demand for OFZ bonds, which are auctioned weekly by the ministry, has soared this year after months of uncertainty surrounding possible new U.S. sanctions on holdings of Russian debt.

The finance ministry said on Wednesday it had sold 137.13 billion roubles ($2.13 billion) worth of OFZ bonds at two auctions, while demand for the papers reached a combined 192.23 billion roubles.

The ministry scrapped the limits on offerings of OFZ bonds in February, allowing it to borrow more. The move, it said, was meant to make it more flexible in its reaction to market conditions.

A substantial chunk of demand for OFZ bonds usually comes from foreign investors seeking high yields.

The rouble usually gets a boost when demand at such auctions exceeds market expectations, said Arnak Grigoryan, an analyst at the Russian branch of Citibank.

“In the short term, we expect the rouble’s exchange rate by the end of the week to be in the range of 64-65.2 against the dollar if there will be ‘risk on’ sentiment,” said analyst Sergey Nagorny of BCS brokerage.

In recent days the rouble has also been supported by oil prices, which hit five-month highs this week.

Analysts have said the effects of high oil prices on the rouble would be moderate, given lingering uncertainty surrounding possible new sanctions against Moscow and general investor sentiment toward emerging markets.

Russian stock indexes were also up after the bond auctions.

The dollar-denominated RTS index was up 1 percent at 1,260.72 points. The rouble-based MOEX Russian index was up 0.33 percent to 2,578.71 points.

For Russian equities guide see

For Russian treasury bonds see ($1 = 64.4050 roubles) (Reporting by Gabrielle Tétrault-Farber and Vladimir Abramov Editing by David Holmes and Alexandra Hudson)

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