FOR SALE: Russian Debt
The Russian Government’s bond auction last week was an important indicator of the state of the country’s economy. After months of geopolitical unrest upsetting the markets, it showed that attitudes towards the industry are calming, yields are stabilising and the Rouble is picking up.
Since July, nine auctions have been cancelled as sanctions against Russia affected the country’s borrowing costs. The weak Rouble has meant borrowing costs have been steadily increasing, and the Government has managed to avoid issuing debt by relying on revenue from oil and gas exports.
The debt sale on Thursday achieved a yield of 9.37%; a return to levels of late August 2013. I would agree with the comment in the FT that in light of Russia’s position in the global market, this was indeed a “decent result”.
Though the long-term economic prospects still look positive, current geopolitical factors make it impossible to predict how the next couple of months will play out for the Russian economy.