New Russian sovereign bonds would fly

The news that Russia intends to plough ahead with its plans for funding in the international capital markets was greeted with some initial disbelief. At first glance, the international environment does not look good for a Russia return. But look again, and there is little reason to believe that demand for a Russian sovereign new issue would be anything but enthusiastic.

  • By Francesca Young
  • 10 Jul 2018
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The Russian Ministry of Finance’s borrowing plans for the next three yearsstart with a plan to borrow Rb1.48tr ($24bn) in 2019. Bloomberg says that in 2019 Russia is looking to raise $7bn abroad, of which $4bn will be used to swap for outstanding securities.

It has been a messy year for Russian bond trading. There have been no new Russian Eurobonds printed since the manic Russian bond trading in April, prompted by the new, more severe US sanctions on the country that targeted individual and their assets, and thus, private companies. 

Bond spreads from Russian entities, including the sovereign, spiked as investors feared the US Treasury’s next move. In previous rounds of sanctions, state-owned companies had been hit such as VTB and Sberbank — albeit more softly than in the latest round, with the buying of new debt prohibited rather than the holding of outstanding paper.

But US Treasury Secretary Steven Mnuchin has remained consistent in his advice since the start of this year that slamming Russian sovereign debt with sanctions would bring too many risks of a destabilization of markets beyond Russia.

As such, the sovereign, along with Gazprom — a strategically important entity, not just in Russia but abroad too — is being viewed by the market as one of the most unlikely targets for further sanctions from the US or the EU. 

So if the Russian sovereign was to offer new paper to international investors, even as soon as tomorrow, what would happen? Would investors refuse to buy it on moral grounds? 

Don’t be ridiculous. They would pile in. Many still want exposure to Russia, especially as the oil price keeps rising, and there are few bonds that offer a safe way to take exposure to the country. Most would see the elevated spreads that Russia now offers against February’s levels as a buying opportunity — and it’s worth noting that Russia’s spreads are actually even tighter now that they were a year ago. 

Russia’s borrowing plans may seem brazen. But the execution of them is not beyond belief.

  • By Francesca Young
  • 10 Jul 2018

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 219,258.01 824 8.16%
2 JPMorgan 208,215.92 896 7.75%
3 Bank of America Merrill Lynch 191,951.67 639 7.14%
4 Barclays 168,011.84 595 6.25%
5 HSBC 149,519.66 684 5.56%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 29,830.94 52 6.95%
2 BNP Paribas 28,159.68 110 6.56%
3 UniCredit 22,060.45 102 5.14%
4 Credit Agricole CIB 22,050.13 103 5.13%
5 SG Corporate & Investment Banking 21,979.64 84 5.12%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Goldman Sachs 9,517.23 44 8.70%
2 JPMorgan 9,409.35 41 8.60%
3 Citi 7,643.16 42 6.99%
4 UBS 5,979.77 21 5.47%
5 Deutsche Bank 5,145.17 32 4.70%