Russia To Prepare $7 Billion Bond Sale In Bond Market Shake-Up
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The Russian government is set to sell up to $7 billion in government bonds in the coming days, said a report by the Financial Times on Monday, as the nation prepares to overhaul their domestic bond market in order to attract foreign cash.
According to FT, the Kremlin is ready to issue the full bond amount sometime this week – with the bond said to be split into three parts, maturing in five, 10, and 30 years.
The Russian government is set to sell up to $7 billion in government bonds in the coming days, said a report by the Financial Times on Monday, as the nation prepares to overhaul their domestic bond market in order to attract foreign cash.
According to FT, the Kremlin is ready to issue the full bond amount sometime this week – with the bond said to be split into three parts, maturing in five, 10, and 30 years.
A report by Reuters also claimed that the Russian government could be looking for an additional $30-50 billion in foreign investment by 2014, as the nation seeks to tap into the foreign market for local currency debt.
“The implications are revolutionary,” said Dmitry Dudkin, head of fixed income research at Uralsib Capital in Moscow, to Reuters.
[quote]”The mass of money that can shift is very large,” added Christian Keller, emerging Europe research head at Barclays Capital. “You now have an opportunity of a market that has attractive yields, good debt dynamics, and has been under-appreciated.”[/quote]Although Russia has not sold dollar-denominated debt since April 2010, interest remains high in what could possibly be one of the largest emerging market debt offerings on record.
And while investors shunned the last bond auction in Russia earlier this month due to political instability following Vladimir Putin’s presidential election victory, investor confidence is said to be back on the rise particularly with the current high price of crude oil – Russia’s biggest exports.
[quote]”All of a sudden there’s this market that no one’s been involved in: everyone wants to try and grab a piece of the action,” said Werner Gey Van Pittius at Investec in London, which manages $10 billion in emerging market debt.[/quote]“Investors are currently in a risk on mode and are more concerned by a lack of sovereign supply than excess supply,” noted Robert Whichello, co-head of global debt syndicate at BNP Paribas. “This combined with strong fund in flows over the last weeks leaves the market well placed to absorb the Russian supply.”
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The Russian treasury managed to sell just 8 billion roubles ($276 million) out of a planned 45 billion roubles ($1.55 billion) bond auction on March 7 this year. Investors are confident that the upcoming bond sale will prove different.
“The market’s mood is good, and appetite is there,” said Viktor Szabo, a fund manager at Aberdeen Asset Management.
“We have the feeling that the majority of foreign investors are way, way underweight Russian local bonds, because of not being able to gain exposure,” added Szabo, who helps manage around $7 billion in emerging market debt.
