Russian experiment Eurobonds received “good” the Euroclear

Investors who have invested two months ago their capital in Russian Eurobonds, convinced of the correctness of the choice made after the Russian overcame the last obstacle on the way to their placement.
The world’s largest settlement system maintenance Euroclear Bank SA bonds on Thursday launched a service of the Russian Eurobonds with maturity in May 2026. Thereby eliminating a major barrier to foreign access after there was concern that it will prevent international sanctions against the background of the sales of these securities. Once adopted by Euroclear solutions bonds climbed as much as possible from the moment of release, and the head of cash management of “URALSIB Asset Management” Alexei Korolenko says that the rise can continue.

“Yields may fall another 20-30 basis points, - said Korolenko, who bought the new Eurobonds at the time of their initial public offering, and is not to sell them -. I expected that Euroclear will permit over time.”

But if you look at the May situation, such a statement may seem far removed from the truth.

Foreign banks, including, Goldman Sachs Group Inc., avoid these bonds because the US and the European Union warned that the money raised can be sent to companies caught in the sanctions. When a sale after all was made with the sole organizer in the person of a state bank, Russian Finance Minister Anton Siluanov criticized the State Department, saying that US officials telephoned investors and clearing organizations, and told them to stay away from this issue to 1.75 billion dollars.


On Thursday, Eurobonds maturing in 2026 rose by two per cent, and as of 6:59 Moscow time, their profitability declined by 0.25% to 4.12%. Compiled by Bloomberg data show that the yield on bonds with a maturity of two years later fell below 4.28%.

“Of course, this is good news for Russia, - said Jan Dehn (Jan Dehn), the head of research at London-based Ashmore Group Plc, which manages $ 51 billion in emerging markets -. Now they will be able without delay to carry out similar issues, if it is not some one-time exception will be A or not -. it remains to be seen. ”

Euroclear decision not only has symbolic significance for the Kremlin. It opens up opportunities for new issues for the foreign market, which according to budget rules this year may grow to three billion dollars.

Another question is whether Russia needs the money in order to close the budget deficit.

The flow of finance

Potential foreign loans looks like a dwarf on the background of the funding that the government has already launched, distributing cash from the welfare fund of 40 billion dollars. It also sells state stakes in major Russian companies and next year plans to increase fourfold issue local bonds, bringing it to $ 20 billion, says the chief economist for Russia of ING Groep NV Dmitry Polevoy.

In May, Field pointed out that the delay in the Euroclear service Eurobond is under a shaky foundation, because the sovereign borrower, recommending securities of its clients, is not subject to sanctions.

The Ministry of Finance “does not understand why the process was so long,” said Deputy Finance Minister Maxim Oreshkin after Euroclear has taken its decision.

President Vladimir Putin is trying to minimize the impact of the penalties imposed in 2014 because of the conflict in Ukraine, because of which the largest companies in the country have lost access to international credit markets.

Until Thursday, when it was decided, foreign investors can buy the new bonds only if they had an account in the National Settlement Depository. The majority of the foreign bond holders of such accounts is not because the Russian government bonds are usually available through Euroclear.

“Russia may place new issues, but Russian may be a concern that the US government responds by taking counter measures to close loopholes - said strategist at London-based Nomura International Plc Timothy Ash (Timothy Ash) -. Probably, they can take advantage of this victory for PR, but are unlikely to use issues as a major source of funding. ”

Galushko Xenia (Ksenia Galouchko), Voytova Olga (Olga Voitova)

Bloomberg, US

30 July 2016

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