After the Federal Reserve’s decision, the yield of Russian Eurobonds may increase
In the near future the yield of Russian Eurobonds may grow.
American edition Bloomberg told about the yield of Russian bonds against the background of a friendly decision of the Federal Reserve and stabilization of oil prices. The policy became softer, and Russia showed unprecedented prudence. The Ministry of Finance sells dollars and Eurobonds.
During the last two sales of Eurobonds, the Ministry of Finance suddenly faced geopolitical problems. However, things went much better after Fed President Jerome Powell made a new decision, which stimulated the growth of rates in an emerging market.
What will happen to the yield of Russian Eurobonds?
Russia has put up USD-denominated bonds for 16 years on the external debt market. In this case, the indicative volume of the proposal for the initial yield was slightly less than six percent, said a source closely familiar with the conditions, but wished to remain anonymous – because the details of the issue have not yet been announced. The plans of the Ministry of Finance include the placement of debt securities denominated in euros with a maturity in 2025 and a benchmark yield of about 3%. The transaction appeared on the initiative and with the direct participation of such major financial enterprises of the Russian Federation as VTB Capital and Gazprombank. Sberbank, by the way, also tried to join the case, but was not selected, said the Ministry of Finance.
In 2018, Russia also tried to offer foreign bonds, while in the world boasted a scandal associated with the poisoning of the spy Sergei Skripal and his daughter Julia in Salisbury. Eight months later, when there was a conflict with Ukraine in the Kerch Strait, the bonds were again offered. As a result, both deals were successful – investors were indifferent to the geopolitical situation and were more attracted by the high yield of Russian securities.
Even in those situations, the offering was successful, but today’s initiative of the Ministry of Finance looks all the more rosy.
The Fed unexpectedly predicted a stable state of bets for all participants – according to this prediction, they will not rise. This happened on Thursday, and it became a huge incentive for the rise of Russian securities. In 2019, the Russian precious currency and bond markets showed record growth in its category, because the policy of the United States of America towards Russia has become more loyal. Oil prices returned the ruble to its former appeal in short-term operations after the 2018 debacle.
Foreign investors are interested in purchasing rouble-denominated securities, as evidenced by the increased demand in the market. In January, the share of non-residents began to arrive, after the outflow of almost ten months. And seven days before that, the Ministry of Finance held the largest ever auction of ruble bonds. If this time the bonds placement turns out to be successful, the Russian Federation will enter the large list of issuers, which already includes Ghana, Benin, Uzbekistan, Egypt, Turkey and Saudi Arabia. And this will mean that in economic terms, the Russian Federation will be able to resist American sanctions.