By Chris Vellacott
LONDON Mon Feb 23, 2015 5:29am EST
LONDON Feb 23 (Reuters) - Russian dollar bonds fell as much 2.5 cents on Monday after Moody's became the second agency to cut their credit rating to junk while Ukrainian debt also fell, hitting new record lows.
Russian markets are shut for a holiday but the rouble fell 3.4 percent against the dollar on international markets to a one-week low.
Moody's downgraded Russia to Ba1 from Baa3 late on Friday, citing the impact from the Ukraine crisis as well as the steep fall in oil prices and the rouble. With junk ratings from two agencies, Russia risks an acceleration in outflows from more conservative asset managers.
"The fundamental picture is still complicated and I don't see any improvement. What I see is increasing tensions with the West, so while the Moody's story was well anticipated it just adds to the overall negative backdrop," said Regis Chatellier, credit strategist at Societe Generale.
The 2030 dollar bond fell 1.1 cent in price to 106.5, a one-week low. The 2043 issue fell 2.5 cents . All other bonds also shed around a cent while Russia's yield spreads over Treasuries widened 9 basis points to 524 bps.
Ukrainian dollar bonds traded around 40-42 cents in the dollar on fears an upcoming restructuring would inflict big losses on bondholders.
In other emerging markets, Turkey's lira retreated more than 1 percent against the dollar as investors braced for a 25 basis point interest rate cut expected when the central bank holds a policy meeting on Tuesday.
Investors were also rattled by a military operation to rescue around 40 soldiers guarding a Turkish enclave in Syria, raising international tensions.
Hungary's forint was down 0.3 percent to the euro after the ruling Fidesz party was defeated in a by-election and lost its two-thirds majority in parliament.
Malaysia's ringitt fell 0.5 percent, nearing a six-year low as state development fund 1MDB said it may not be able to service its debt and could require an injection from the finance ministry.
Broader emerging equities fell 0.3 percent, largely due to the impact of a strengthening dollar.
Nigeria's naira, battered by weak oil prices, lost 3 percent against the dollar after data over the weekend showed slowing economic growth.
A sharp drop in the price of oil has hammered the naira which has hit successive record lows against the dollar in the last three months despite the central bank burning through 20 percent of its reserves to prop it up.
For GRAPHIC on emerging market FX performance 2015, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2015, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2015, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2015, see link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see ) (Additional reporting by Sujata Rao; Editing by Ruth Pitchford)
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