Russia: 19 November bond sale
Published 24 November 2014
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This article is no longer current. Please refer to Overseas Business Risk – Russia
Summary
Russia attempted to place a 5 billion rouble ($100 million) bond on international markets on 19 November. Less than 10% was taken up. Russia is not currently under pressure to sell debt, but this is a reminder that international markets remain wary of Russian assets.
Detail
On 19 November, the Russian Ministry of Finance attempted to place 5 billion roubles (around $100 million) of treasury bonds onto international markets. However, in response to low demand and high yields, less than 10% of the offering was sold (491 million roubles, around $10 million).
Although the Finance Ministry has historically conducted international bond auctions on a weekly basis, this was the first auction since 8 October, after the last five offerings were cancelled due to “unfavourable market conditions”. Following the auction, the Ministry’s press service suggested that borrowing terms remained “unfavourable” and rates were still “excessive”. The average yield on the bonds sold was 10.06%; the last time similar 18-month notes were issued in January, they sold with a 6.67% yield.
Despite the sharp drop in the oil price since July, rouble depreciation has helped to cushion the impact on Russia’s public finances. The budget is projected to run a slight surplus this year, and there is no significant pressure on the Russian government to sell debt. In that context, Oleg Kouzmin, an economist at Renaissance Capital, described the auction as an “indicative” placement designed to test the market. The FT suggested that the “limp” demand demonstrated “the still fragile state of Russia’s bond market”.
Comment
Although Gazprom successfully issued a $700 million bond on 5 November, the weak demand for this sovereign debt auction highlights that international markets remain wary of Russian assets.
Disclaimer
The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.