MOSCOW: Russia sold only a fifth of the bonds it offered at its first debt auction since November as investors demanded yields higher than it was willing to pay amid concern the government will lose its investment-grade credit rating.

The Finance Ministry rejected 87 percent of the bids received at an auction of 5 billion rubles ($76 million) of May 2016 notes Wednesday. While the government paid an average yield of 15.27 percent, almost five percentage points more than at its last sale of the debt in November, that was still 125 basis points below the yield at Tuesday's close.

The size of the sale underlines the challenges Russia faces in tapping local debt markets to finance its biggest budget deficit as a percentage of economic output since 2010. Standard & Poor's is in the midst of a so-called negative watch assessment of Russia, with at least a 50 percent chance the sovereign will be cut to junk this month as oil's slide pushes the economy to the brink of a recession.

"The fact that investors aren't willing to purchase Russian debt at 15 percent interest rates tells you something has gone wrong somewhere," Neil Shearing, the chief emerging-markets economist at Capital Economics Ltd. in London, said by phone. "There's a growing acknowledgment that Russia's public finances are on an unsustainable footing."

Crude's 60 percent slump from a peak last year and sanctions over Russia's role in the Ukraine conflict forced the Finance Ministry to ax five debt auctions in a row before this week. The government returned to the market as Russia's five-year yields rose for the fifth time in six days amid an advance in oil.

The gains drove the yield on five-year government bonds 19 basis points lower as of 7:30 p.m. in Moscow, bringing the decline in the past week to 195 basis points. The yield fell to 15.17 percent, the lowest in a month and trimming its surge since President Vladimir Putin's incursion into Crimea in March to 7.2 percentage points.

Borrowing costs jumped in the months that followed the annexation of the Black Sea peninsula as the US and European Union imposed sanctions that, along with the slump in oil, sparked an exodus from ruble assets. The currency, which tumbled 46 percent against the dollar in 2014, weakened 0.3 percent to 65.40 per dollar Wednesday.

Russian stocks are off to the strongest start for a year since 2006 as the weaker ruble boosts earnings prospects for exporters since they earn dollars and euros and their costs are mainly in the local currency. OAO Lukoil and OAO Gazprom led gains in the benchmark Micex Index Wednesday and are up 23 percent and 14 percent, respectively, in January. The Micex closed at its highest level since March 2012.

Twenty-six members of the Micex were trading above their 50-day moving average Tuesday, up from 15 at the end of last year, according to data compiled by Bloomberg. Brent crude added 1.5 percent Wednesday to $48.69 per barrel after retreating in the two previous days.

Russian companies won't renege on borrowings from foreign investors as the country faces the loss of its investment-grade score, VTB Group Chairman Andrey Kostin said in an interview with Bloomberg TV in Davos, Switzerland. Moody's Investors Service and Fitch Ratings both knocked down Russia's rating to one level above junk this month.

The nation's budget deficit is set to widen to 1.4 percent of economic output in 2015, according to forecasts compiled by Bloomberg. To lure investors wary of taking on long-term Russian risk, the ministry is offering mostly securities due in one to three years, Konstantin Vyshkovsky, the head of the Finance Ministry's debt department, said in a December interview. It will seek to sell bonds "unless the conditions are shocking," he said then.

"The volume is very small, despite a short bond offered," Dmitry Polevoy, an economist at ING Groep in Moscow, said in e-mailed comments. "It's hard to understand who would buy at this yield, unless you make a bet on quick rate cut."