Page 9 - RusRPTMay19

Combined these changes have made investors “risk-on” and “yield-hungry” again and given Russia’s rock solid macro fundamentals, Russian OFZ is one of the first port of calls. Russia’s bonds are about as safe a bet as it is possible to have in the bond world as Russia's Fx/gold reserves reached $487.8bn as of April 1 2019, according to the data by the Central Bank of Russia (CBR), their highest level since 2014 when the sanctions regime began. The level of reserves is now so high that Russia for the first time ever can cover its external debt dollar-for-dollar in cash. And that is in a world where many of the leading central banks have interests rates close to zero and are running debt-to-GDP ratios in triple figures.
According tobne IntelliNews Kremlin sources, the Kremlin is as worried about a fresh international debt crisis in the west as it is about more sanctions, so it has been selling off its US assets and accumulating gold reserves as part of its gross international reserves (GIR) as fast as it can.
All this has been driving foreign demand for OFZ where the auctions have seen record sales in the first months of this year. As the chart shows there has been a sharp upswing in the share of foreigner holding OFZ this year, which is now back to 30% and on course to overtake its previous record of 34% this year.
A further driver of bond investor interest is while big western economies are flirting with recession, growth in Central and Eastern Europe (CEE) is holding up much better. The IMF predict economic growth in Germany this year will be only 0.8% y/y in 2019, which is below expectations, the CEE region will see more balanced growth: the IMF increased its 2019 growth forecast for Poland to +3.8% y/y, Hungary to 3.6% and Bulgaria to 3.3%, while cutting the 2019 expectations for Czech Republic to 2.9%, Slovakia to 3.7%, Romania to 3.1%, Belarus to 1.8% and Russia to 1.6%.
Bond investors at this week’s MinFin auction mainly bought the long dated 10 year bonds, but the ministry also sold RUB50.4bn worth of the shorter-dated of July 2024 OFZs.
2.4 Duma adopts internet control law
Duma approves a new law giving the state new power to control the internet on April 11. The idea for the law first appeared in 2018 when the government tried to ban messaging service Telegram. The attempt was a total failure and it showed the limited tools available to the state when dealing with the internet — unlike neighbouring China.The US cyber attack in October 2018 on Yevgeny Prigozhin’s “troll factory” might have accelerated adoption of the law.
The new law will allow the Russian authorities to:
9 RUSSIA Country Report May 2019 www.intellinews.com