(Bloomberg) -- The ruble rallied along with Moscow stocks after President Vladimir Putin announced a cease-fire agreement for Ukraine, helping to reduce regional tension and stave off the threat of further sanctions against Russia.
The ruble rebounded 0.6 percent to 64.8750 versus the dollar as of 12:57 p.m. in Moscow, erasing a drop of as much as 3.3 percent. The RTS stock index surged 5.4 percent to 877.31.
Russian assets climbed after Putin said the cease-fire in the 10-month conflict in eastern Ukraine will start from midnight, Feb. 15, telling reporters “we agreed on the main things” during all-night talks with the leaders of Ukraine, Germany and France. Failure to reach a deal could have triggered new European Union penalties against the Russian economy, which is on the brink
of recession amid previous rounds of sanctions as well as falling oil prices.
“This is good news, which is positive for Russian assets,” Vitaly Isakov, a money manager at Otkritie Asset Management in Moscow, said by e-mail. “The key thing is that terms of the agreement are actually complied with. If military activities resume, markets will react in a negative way.”
Government bonds rose for a second day, lowering the yield on five-year debt by 12 basis points to 13.69 percent. The nation’s borrowing costs are up almost six percentage points since Feb. 28, before the Russia’s annexation of Ukraine’s Crimea region and the start of fighting between pro-Russian separatists and government forces in eastern Ukraine.

‘Big Effort’

While the accord gives “great hope,” there is still a “big effort to make” on Ukraine talks, German Chancellor Angela Merkel said after the talks in Minsk, Belarus.
“This deal reduces the risk of new Russia sanctions,” Isakov said.
The collapse of previous cease-fires has stoked skepticism as to whether this one will hold. Ten months of fighting have killed more than 5,000 people, ravaged Ukraine’s economy and propelled Russia toward its first economic contraction since 2009.
Ukrainian President Petro Poroshenko said control of Ukraine’s border with Russia would revert back to his government by year-end, contingent on a constitutional overhaul. While he also pledged to decentralize some powers away from Kiev, he rejected autonomy for the two breakaway eastern regions and refused to switch to a federal system of governance.
“It looks like a major breakthrough towards a full political settlement of the crisis,” Vladimir Osakovskiy, the chief economist for Russia at Bank of America Corp. in Moscow, said in an e-mailed note on Thursday. “Implementation is clearly a big question mark.”
The Russian currency’s gains this week have pared its decline this year to 6.3 percent.