What Sanctions? Foreign Markets Snap up $3 Billion in Russian Bonds and Ask for Seconds

The push for more Russia sanctions in the US may have actually helped Russia sell its bonds

Fri, Jun 23, 2017 | 2188 Comments

Here is a fun story. Russia just printed up $3 billion in US Dollar-denominated bonds and the demand was so high it could have easily sold $6 billion if it wanted to. 

This even though this current issue of bonds offered the lowest yields offered by Russia ever in its modern history:

Demand for the latest issue of Russia’s sovereign Eurobonds exceeded $6bn, more than double the proposed amount of $3bn, according to the issue’s organiser VTB Capital.

The high demand flew in the face of current efforts in the US to significantly broaden the sanctions imposed on Russia in 2014 for its actions in Ukraine. 

Despite the rapidly worsening external environment prior to the placement, including  sliding oil prices, the Russian Finance Ministry and VTB Capital on June 20 placed 10- and 30-year US Dollar denominated Eurobonds yielding 4.25% and 5.25%, respectively.

These made the lowest rates in the country’s history. In stressing the sanctions-resistant nature of the sovereign offer, Andrei Solovyov of VTB Capital said foreign investors, “most of whom” were American, bought a “large part” of the issue.

Despite the sanctions threat, investors surveyed by Bloomberg on June 19 confirmed their interest in the Eurobond, which are seen as cheap and coming in limited supply from Russia.

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The buyers were largely foreigners, including Americans.

Actually, the Russia sanctions bill currently in the Congress may have actually helped the sale. Currently Americans are barred from lending to Russian banks, but not from buying up Russian sovereign debt.

The new sanctions bill drawn up by the Senate would end this "loophole" and sanction purchase of Russian bonds as well. It is entirely possible that US investors therefore saw this issue of bonds as the last opportunity to stock up on some Russian debt.


Correction: An earlier version of this article stated the bonds were denominated in euros, not US dollars

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