Russia to sell first Eurobond in more than a year

Moscow/Brussels — Russia is seizing on a market rally after the US election to sell its first Eurobond in more than a year.

The sale will allow Russia to lock in low borrowing costs now in case US president-elect Joe Biden takes a tougher stance towards Moscow. Emerging-market bond yields fell to a record low this week on expectations of increased stimulus and a coronavirus vaccine.

“It’s a favourable time to sell,” said Maria Radchenko, head of fixed-income research at Renaissance Capital in Moscow. “Sanctions rhetoric has quieted down and risk appetite has increased sharply since the elections.”

The Russian finance ministry plans two euro-denominated bonds maturing in seven and 10 or 12 years, according to a person familiar with the matter, who asked not to be identified because they’re not authorised to speak about it.

Gazprombank and Sberbank were appointed joint bookrunners and VTB Capital will handle Russian accounts.

Washington barred US investors from taking part in non-rouble sovereign debt sales in 2019 and a bipartisan group of senators have proposed extending the restriction to rouble debt. Russia is ready for such an eventuality and a recent decrease in the share of foreigners in the market will soften the blow, first deputy prime minister Andrey Belousov said in an interview with state news service Tass on Tuesday.

The comments were the first sign Russia is preparing for a change of administration in the US after the Kremlin said Monday it would hold off congratulating Biden until the official tabulation of results.

Local borrowing

Russia’s foreign-currency reserves are the fifth-biggest in the world, and its debt-to-GDP ratio is among the lowest, so the country doesn’t urgently need to tap international markets. The finance ministry chose to boost borrowing from local banks to fund stimulus this year.

Russia last sold new euro-denominated bonds in November 2018. It tapped the issue in March last year. The yields on those notes, due in 2025, spiked to 2.55% at the peak of the coronavirus pandemic in March, but have since fallen to 0.78%.

The ministry also visited foreign bond markets in June 2019, when the finance ministry tapped notes maturing in 2029 and 2035 for a total of $2.5bn.

Russian companies have raised the equivalent of $12.6bn in dollar and euro notes so far in 2020, the biggest volume over the same period since 2017.

Bloomberg