BOFIT Viikkokatsaus / BOFIT Weekly 2018/09

Standard & Poor's last week raised its rating of Russian sovereign foreign bonds to investment grade (BBB-). The earlier junk-grade rating of BB+ lasted for three years. The rating of Russia's local currency government bonds were also upgraded by one notch to BBB. S&P Global Ratings noted that Russia's macroeconomic policy has allowed the economy to adjust to lower commodity prices and international sanctions. The outlook for the Russian economy is stable. S&P's rating for Russian sovereign foreign bonds now matches that of Fitch, while Moody's continues to apply a junk rating (Ba1).

The S&P upgrade means that two of the big three international credit ratings agencies now give investment grade on Russia's foreign bonds. Demand for the bonds may increase as this status allows large international institutional investors again hold them. The Russian government currently faces no compelling need to borrow from abroad as the current fiscal outlook is rather good thanks to the rise of oil prices and fiscal discipline. This year's federal budget has plans to issue about 7 billion dollars in foreign-currency bonds.