Russian retail investors poured RUB138bn ($1.7bn) into mutual funds in May, with bond funds accounting for more than four-fifths of net inflows as punters expect more Central Bank of Russia (CBR) rate cuts boosting the demand for fixed-income products, Kommersant reports.

Data from Investfunds showed net inflows into retail mutual funds — including open-ended and exchange traded funds — reached about RUB138bn in May, down nearly a quarter from April’s level but 81% higher than in the same month a year earlier. Cumulative inflows since the start of 2026 have approached RUB700bn – more than four times the volume recorded in the corresponding period of 2025.

The CBR has already put in 550bp of rate cuts in the last year after governor Elvia Nabiullina unorthodox experiment to bring down inflation worked: inflation has fallen from over 10% at the end of 2024 to 5.6% now and continues to fall. As a result the CBR has been able to cut interest rates from a crushing peak of 21% a year ago to 14.5% now, with more cuts expected this year.

Market participants said the monthly slowdown did not indicate waning investor interest. According to Sergei Dyudin, director of the portfolio investment department at VIM Investments, “the April result was driven by a localized surge in activity, while May figures remained within the range of this year's average monthly figures,” Kommersant reports.

Bond funds attracted RUB112.7bn during the month, representing almost 82% of all retail mutual fund inflows. Although below April’s record RUB128.3bn, the average daily inflow rose because of a lower number of trading sessions. Since the beginning of the year, bond funds have garnered RUB423bn from investors – almost five times the level seen in the same period of 2025.

Investor appetite has remained resilient despite more cautious signals from policymakers after a 2pp increase in VAT in January reintroduced some inflationary pressure. The Bank of Russia lowered its key rate by 50 basis points in April to 14.5%, while revising its forecasts for future rates and signalling that a pause in easing remains possible. Yields on medium- and long-term OFZ government bonds have risen to about 14.7%-14.8%.

“Investors believe in further rate cuts, so they are using periods of short-term corrections as a time to buy. However, a factor of mild uncertainty has emerged in the market,” Andrey Rusetsky, investment director at Pervaya Asset Management, told Kommersant .

Spreads over government securities for high-quality corporate bonds are quite narrow, and credit risks in medium-quality securities have not yet decreased sufficiently to consider their current spreads attractive, according to bond traders.

Nabiullina says Russia is on track to return to the central bank’s target inflation rate of 4% in 2H27 and is under a lot of pressure from business to cut rates as fast as she can. However, “taking into account the shift of price growth from the end of last year to the beginning of the current year”, the inflation forecast for 2026 has been raised by the CBR to 4.5-5.5%.

The baseline scenario sees the average key rate in the range of 13.5-14.5% in 2026, which implies maintaining “tight monetary conditions”.

“The CBR will assess the expediency of further key rate cuts at upcoming meetings depending on the sustainability of the slowdown in inflation and the dynamics of inflation expectations,” the regulator commented at its last monetary policy meeting.