BOFIT Viikkokatsaus / BOFIT Weekly 2018/12

Last week the finance ministry placed 11-year and 30-year Eurobond issues worth a total of 4 billion dollars. The 11-year bond carries an initial yield of 4.63 % p.a. while the 30-year bond pays 5.25 %. Most of the money raised from the issue will go to buying back 3.2 billion dollars of state sovereign bonds set to come due in 2030 and carrying a hefty coupon of 7.5 %.

Demand for the new bonds was about double the supply. Finance minister Anton Siluanov said that foreign investors bought most of the debt. The heavy demand for Russian bonds reflects, among other things, their high real yields relative to most sovereign bonds at the moment and the fact that large international institutional investors can again invest in Russian sovereigns with the recent upgrades in Russia’s creditworthiness (BOFIT Weekly 9/2018).

According to CBR estimates, the Russian government owed roughly 55 billion dollars (slightly over 4 % of GDP) in foreign debt at the end of 2017. Of this amount, approximately 15 billion dollars is foreign currency debt, denominated almost entirely in US dollars. The remaining 40 billion dollars consisted of ruble-denominated debt. The 2018 federal budget law reserves the authority for the government to issue about 7 billion dollars in foreign debt.