All news

Investors may withdraw from Russian sovereign bonds — ACRA

The Russian Analytical Credit Rating Agency warns US sanctions against the Russian sovereign debt may lead to an outflow of 8-10% of investors from sovereign debt securities

MOSCOW, August 17. /TASS/. US sanctions against the Russian sovereign debt may lead to an outflow of 8-10% of investors from sovereign debt securities in case of their introduction, the Russian Analytical Credit Rating Agency (ACRA) says in its research (available with TASS).

"Introduction of sanctions for purchase of the Russian sovereign debt can reduce the investor base and accordingly increase the average cost of borrowings for the government. Assuming that geographical distribution of potential holders is approximately equal to the distribution of current holders, we estimate the potential of demand volumes drop by 8-10% relatively to the level of 2018 year-start," ACRA says in its review.

The base case of the outlook anticipates that the US debt sanctions will influence on behavior of investors in the US jurisdiction and to a considerably lower extent in other ones, ACRA reports.

The actual demand of international appetite for the Russian sovereign bonds could be observed already after the previous round of sanctions in April 2018, the agency says. "The volume of bonds held by nonresidents dropped by 5.4% by early July. Ruble-denominated federal loan (OFZ) bonds showed the bulk of the decline," agency experts say.

The United States approved expansion of sanctions against Russia in summer 2017 and recognized the possibility of their application to the Russian sovereign debt. However, the US Treasury Department warned later that application of sanctions against the sovereign debt of Russia and Russian derivatives could lead to adverse consequences not merely for the Russian but also for the global financial market and for US investors.