The Russian rouble firmed against the dollar in early trade on Tuesday, while prices for OFZ government bonds rose to their highest since Feb. 21 on expectations that the central bank would soon cut interest rates again.

At 0738 GMT, the rouble was 0.6% stronger against the dollar at 79.30 and had eased 0.2% to trade at 83.97 versus the euro after on Monday briefly touching its strongest level since April 8 of 82.60.

The rouble's movements are artificially limited by capital controls that Russia imposed in late February in response to the hit suffered by its financial sector and economy from unprecedented western sanctions. The sanctions are designed to punish Moscow for sending tens of thousands of troops to Ukraine on Feb. 24.

On the bond market, where non-residents have not been allowed to sell paper since late February, yields on 10-year benchmark OFZ bonds fell to 10.36% from around 11.6% a week ago, moving inversely with their prices.

Central Bank Governor Elvira Nabiullina on Monday said the central bank should work on increasing the availability of credit for the economy, indicating that it would consider cutting its key rate from 17% at the next board meeting on April 29.

Nabiullina also warned that the Russian economy "will enter a period of structural transformation" in the second and third quarters, which analysts said meant a deep and rapid economic contraction.

In just two quarters, the Russian economy could shed all the gains it posted in 2012-2021, said Evgeny Suvorov, an economist at CentroCreditBank, predicting that the central bank would cut its key rate to 15% next week.

Russian stock indexes were down.

The rouble-based MOEX Russian index fell 1.4% to 2,310.3 points, a level last seen on Feb. 25, before the central bank suspended stock market trading for nearly a month.

The dollar-denominated RTS index dropped 1% to 916.2 points.

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For Russian treasury bonds see (Reporting by Reuters)