Russia’s finance ministry issued a new eurobond

BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/21

This week Russia issued sovereign dollar-denominated eurobonds for the first time since 2013. The bond offering was seen as a means to feel out investor sentiment and to support pricing in Russian dollar-denominated debt securities. Furthermore, the liquidity situation of Russian banks has improved significantly this spring, and strong demand was expected for new instruments denominated in foreign currencies. The final eurobond placement remained relatively small ($1.75 billion), even though the yield of 4.75 % is quite high. 

In February, the finance ministry approached numerous foreign banks asking of their wish to arrange a $3 billion Eurobond issue. At the time, no willing banks could be found and the offering was postponed. The issue placed this week was arranged exclusively by VTB Capital, the investment branch of Russia’s state-owned VTB Bank, which is currently subject to international sanctions. Uncertainty over the interpretation of sanctions and over secondary markets of the bond limited the participation of major foreign investors.

During the first four months of this year, the finance ministry has issued about 400 billion rubles ($5.9 billion) worth of new ruble-denominated debt. The government’s budgeted net borrowing this year is 300 billion rubles ($4.5 billion) from domestic markets and $3 billion in foreign bond issues.

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