Page 76 - RusRPTJuly18

Bloomberg claimed that foreigners sold about RUB200bn of OFZ in the period, also noting that the sharpest sell-out occurred immediately after the introduction of the sanctions on April 9 to 10, the first two trading days after the Treasury's announcement. The pullback continued into May on the broader trend of pulling out of emerging market assets. At the same time the whole OFZ market grew from RUB6.96 trillion to RUB6.88 trillion in May alone, while the share of foreigners declined from 32.3% to 30.5%. Since the latest sanctions were announced, Russian OFZ investors lost 7.9% in US dollar terms, Bloomberg estimates from Bloomberg Barclays emerging-market index. OFZ will see large placements in 2019 as the new government RUB3.5 trillion Growth Fund for infrastructure , a major part of financing Vladimir Putin's May Decree six-year spending drive, will be financed by issuing OFZs.
Russian corporate issue of ruble bonds was up by a third in the first quarter and the volume of outstanding paper set a new record high of RUB6.7 trillion ($105bn) as of the end of March 2018, Vedomosti daily said on June 18 citing the report by the Gaidar Institute and RANEPA. In January-March 2018 alone RUB132bn ($2bn) of bonds were issued, up by 34% year-on-year. Banks increased their corporate loan portfolio by 1.8% in the reporting period, and most of the domestic corporate debt is still made up by banking loans worth a total of RUB32.7 trillion. In 2017 RUB2.5 trillion ($43.3bn) of domestic bonds were placed, making a record issuance since pre-sanction 2013 when $74.3bn of bonds were issued. Russian energy giants Rosneft and Gazprom accounted for the largest share of the bonds placed. In the past five quarters Rosneft accounted for a third of all domestic bonds issues, while Gazprom accounted for 10%. Analysts surveyed by Vedomosti n oted that ruble bonds are attractive due to low yields, but is not much difference from bank loans as commercial banks are the largest buyers of the issues. While small and second-tier banks have no access to such large borrowers, buying bonds of top issuers allows them access to quality risks for their balance sheet.
Foreign investors, spooked by new sanctions and the on going political showdown between Russia and the US, have sold about RUB200bn ($3bn) worth of Russian domestic federal OFZ bonds since the beginning of April, according to Bloomberg data, following the latest round of US Treasury sanctions imposed on April 6 . The share of foreign investors in outstanding OFZs declined from record-high 34% earlier this year to 31%, according to the First Deputy Governor of the Central Bank of Russia (CBR) Ksenia Yudayeva. The CBR estimates that outflow from OFZ will continued in May. The sharpest sell-out occurred immediately after the introduction of the sanctions on April 9 to 10, the first two trading days after the Treasury's announcement. The pullback continued into May on the broader trend of pulling out of emerging market assets. Since the latest sanctions were announced, Russian OFZ investors lost 7.9% in US dollar terms, Bloomberg estimates from Bloomberg Barclays emerging-market index.
Bond markets in eastern Europe were as dead as the proverbial Dodo in May continuing the slow down already seen in April after the US imposed new sanctions in April.
RUSSIA Country Report July 2018 www.intellinews.com