CEE Bonds

Bankers and investors have expressed their irritation at the US's new set of sanctions on Russia. The latest punitive actions stop US financial institutions from extending debt financing in the primary market to the sovereign.

Emerging market loan bankers have been trying to understand the impact on syndicated lending of the US’s latest sanctions on Russia. The proscriptions have instilled more uncertainty into a collapsing market.

Russia was slapped with sanctions this week that stop US financial institutions from participating in primary issuance from the sovereign. So far, so terrifying as – eek!— Russia’s main artery of finance has been cut. Only it hasn’t been, not really. Don’t be too surprised if the Russia sovereign comes out soon with an international bond to prove it.

EM investors are calling the US Treasury’s latest round of sanctions — this time on Russian sovereign debt — confusing and knowingly ineffective.

Swiss firm responsAbility Investments has closed a $175m microfinance CLO via JP Morgan, revitalising an industry which last saw issuance before the financial crisis.

The US has imposed sanctions on Russian sovereign debt in response to the use of a banned nerve agent in the attempted assassination of Sergei Skripal, a former Russian spy. However, the sanctions are not severe enough to have damaged demand for Russian bonds in the secondary market.

The Black Sea Trade and Development Bank printed its first bond denominated in Azerbaijani manat last week, raising Am10m ($5.9m) with an auction of a two year bond.

The US Federal Reserve delivered a 25bp rate cut as expected on Wednesday, but the signalling failed to satisfy investors desperate for more accommodative policy, causing a mild sell-off in emerging markets.

UBS and Citi trader Tom Hayes was jailed for 11 years for manipulating Libor. But while the trader argued that he was made a scapegoat for the financial crisis, perhaps the rate he rigged is a bigger victim.

Ukraine’s GDP warrants are trading around a cash price of 85. That is way below JP Morgan's view that fair value is closer to 135. No matter the new, surprisingly positive GDP growth forecasts and enthusiasm for the country’s new leadership, from the trading numbers it seems clear that investors do not believe they will get their money from Ukraine.

Investors’ fears were realised on Thursday when the Turkish central bank lowered its key policy rate by 425bp. Analysts joined them in saying that the move will provoke a return of inflation, damage the lira and complicate loan pricing.

Ukraine’s government bonds rallied ferociously this week after a decisive victory for president Volodymyr Zelensky’s Servant of the People party in Sunday’s parliamentary elections. As the end of the week approached, investors started to question how much further the buying could run and what the fate of the country’s GDP warrants will be.