Russia raises USD 1.8 billion in debt placement

RUSSIA / FSU POLITICS - In Brief 22 May 2021 by Alex Teddy
On May 20 the first debt placement took place since the US banned its banks from buying Russian Government debt. Foreigners bought 47% of the Eurobonds (i.e. debt denominated in EUR). The government debt coupons were sold by the Finance Ministry. EU banks bought much of the debt.The US Secretary of State and the Russian Foreign Minister met on May 19. A summit between Putin and Biden is upcoming. This brief detente was a good moment to make the debt placement. US banks are allowed to hold and trading Russian bonds but only on the secondary market.On May 20 Russia sold two branches of Eurobonds. The borrowing rate was 2.65% a year on USD 1.2 billion of 15 year bonds and 1.37% on a further USD 600 million of debt to manure in 2027.Foreign banks were the majority for long term bonds. They bought 53% of those. That is heartening for Russia.Borrowing rates are at a bit of a premium: 0.3 percentage points. That is good value in view of the global situation. Russia is glad to prove that there are lots of banks and investors willing to put their faith in Russian debt. US sanctions have had an effect. There is debate as to how heavy this is. BlueBay said that Russia wanted to sell USD 3 billion in the bond auction (which is the annual target) but was unable to do so this time.Investors are chary about Russian bonds because what if the US then sanctions secondary trading? Saudi Arabia, Qatar and the UAE have secured bigger deals and at a coverage ratio two or three times higher. Russia's orders of about USD 2.5 billion gives it a coverage ratio of 1:3. The coverage ratio means the volume of potential orders placed in the bond auction in compairson to the number of bonds on sale....

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