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January 18, 2019 www.intellinews.com I Page 12
CEE monthly bond wrap: 2018 bond markets hurt by crisis and sanctions
bne IntelliNews
International bond issues had a mediocre year in Central and Eastern Europe (CEE) in 2018. While Central Europe more or less held its own with a total of $38,990mn worth of issues, according to CBonds data, the aggregate value of the bonds issued in the Commonwealth of Independent States (CIS) halved to $22,418mn even if the number of bonds issued fell by much less. In Russia, apart from November, there were almost no issues at all.
It's becoming clearer that 2017 was a vintage year for bond issues amongst emerging European markets. Since then the markets of both Russia and Turkey, which are responsible for the lion’s share of issues, had a terrible 2018.
Russia was hit by four rounds of increasingly painful western sanctions that are increasingly targeting both big companies and financial instruments. And the worst could be yet to
come. The US government has threatened to impose “crushing” sanctions that initially were due in the last quarter of last year, but have been delayed to the first quarter of this year. Specifically, the upcoming sanctions could target Russia’s sovereign debt – both external and domestic – in what would amount to open economic warfare if it happens.
While analysts widely expect more sanctions
on Russia in 2019, opinion is split over whether Russia’s state debt will be in the crosshairs. The problem is that Russian bonds are widely held in the west by institutional investors and any pain inflicted on Russia is certain to boomerang back and hurt US and European pension and insurance funds.
The chaos that the April 6 round of sanctions that targeted oligarch Oleg Deripaska’s aluminium producer Rusal caused on the