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Russian Eurobonds sell like hot cakes

The Russian Finance Ministry has instantly sold out an issue of Russian Eurobonds worth $7bln. The initial subscription amounted to $17bln. The yields are 3% to 6%, depending on the maturity date. South Africa, which, too, floated Eurobonds on Monday, secured lending rates which are by about one percentage point higher.

Ms Natalya Orlova is chief economist of Russia’s Alpha Bank:

“Russia is one of the few emerging economies that are showing good macroeconomic performance – an external debt of under 10% of the GDP and big gold and hard currency reserves. It certainly possesses the resources to repay debts, and lenders queue up to lend money to it.”

We also have an opinion from Professor Alexander Abramov of Moscow’s High School of Economics:

“Russia’s sound macroeconomic situation makes for easy lending rates. Moreover, the Finance Ministry can easily borrow money at home, and its external borrowing is kept to a bare minimum. This beats down lending rates even further.”

By floating its latest Eurobond issue, the Finance Ministry has blazed the trail for big Russian companies, both state-owned and private. Professor Abramov again:

“The issue creates conditions for private companies to borrow money quite cheaply. Their rates will be 3-4%, as set by the Russian Eurobonds, plus an increment depending on the reliability of the borrower. A reliable corporate borrower can look forward to rates of between 5% and 6%.”

Analysts say they expect dozens of big Russian companies to queue up for taking out foreign loans. Corporations want to borrow money before the US Federal Reserve rolls up its quantitative easing programme, resulting in a sharp hike in lending rates. 

2013-09-11, The Voice of Russia, Tatyana Golovanova.

Keywords: economy of Russia, bonds

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