Foreign share of Russia's debt is lowest since 2015

RUSSIA / FSU POLITICS - In Brief 06 Apr 2021 by Alex Teddy

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Statistics published by the National Settlement Depository on April 6 showed that less than 30% of public debt is foreign owned. Foreign investors have sold their holdings of Russian public debt in 2021 because they fret that a tightening of sanctions might impact them. The reduction of foreigners ownings of OFZs (Russian Government bonds) reached USD 1.6 billion in March 2021. April 2020 was even bigger.Benchmark yields are rising, placements are high and the RUB is falling a little. There is also a typical end-of-quarter effect.In March 2020 foreigners owed 34% of Russian public debt. The state began to borrow a lot more after March 2020. State-owned banks purchased most of the debt. Foreign investors' holdings have remained largely stable over the past 12 months. Total foreign holdings are worth USD 43 billion. Foreign holdings have increased in value threefold since 2014.A total ban on US- based financial organizations' owning Russian debt or trading it would be ruinous for foreign investors. That is driving some of them out of the market because the risk is too great.The US has the option to forbid US-based organizations from any involvement in Russian public debt. Hawks in Washington have been demanding just that. However, if the US did this then the consequences would probably be more serious but not disastrous for Russia. It would, however, be a loss to Western financial institutions. The Russian Central Bank is able to provide liquidity to banks to purchase OFZs or the national welfare fund could be used to purchase government bonds if necessary.Russia has international reserves large enough to enable it to get over a total sell-off of public debt by internati...