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Non-residents went for a fixed income

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For the fourteenth week in a row, international investors have been increasing their presence in the Russian debt market. During this time, they invested $ 0.75 billion in it. Non-residents are buying Russian debt securities, which look attractive due to the level of profitability and quality of issuers, as well as the shortage of new issues.
Against the backdrop of declining investments in the Russian stock market, foreign investors are actively increasing their presence in the Russian debt market.
Since the beginning of the month, such investments amounted to $ 160 million. Non-residents were equally actively investing in bonds of Russian issuers in the first half of September ($ 178 million). The continuous inflow of funds into this segment continues for three and a half months, during which time about $ 750 million were received in such funds.
Positive sentiments regarding debt markets have been observed since April this year, even against the background of near-zero and even negative rates in some countries. This is due to large-scale economic support programs. According to Bank of America, the total volume of announced fiscal and monetary stimulus programs exceeds $ 21 trillion. According to the head of Arikapital Alexei Tretyakov, after the rate of the US Federal Reserve was cut to zero, the yield of US government bonds, and then of corporate bonds with an investment rating, dropped to a historic minimum.
According to Ravil Yusipov, deputy general director of MC TFG, since mid-September there has been an appetite for risk in a wide class of assets and countries, including bonds of emerging markets. Indeed, the yield on Gazprom’s 10-year Eurobonds is 3.2% per annum, which is 1 percentage point higher than the average yield on American corporate bonds with a similar BBB rating. “At the same time, Russia is one of the few large developing countries that has no risk of a credit rating downgrade due to the low level of public debt and only a slight deterioration in GDP and budget deficit,” said Mr. Tretyakov.
Last Wednesday, Gazprom placed two tranches of perpetual Eurobonds – for $ 1.4 billion with a yield of 4.6% per annum and for € 1 billion with a yield of 3.9% per annum. At the same time, demand exceeded the volume of placement more than twice. According to the results of the placement, the first vice-president of Gazprombank Denis Shulakov noted that more than 200 investors took part in each of the issues, in total for both tranches the demand of non-residents was 80%. A month earlier, MMC Norilsk Nickel took advantage of high demand by placing Eurobonds for $ 500 million. “New securities do not appear on the market too often, so the proposals of Russian corporations that have undertaken to refinance the remaining debts on conditions much more attractive to them meet with keen interest,” – notes the senior partner of FP Wealth Solutions Alexander Varyushkin.
Market participants expect high demand from international investors for Russian debt to continue, and several more major placements may take place by the end of the year. “The number of investment grade bonds in the world is decreasing due to the wave of downgrades, which will create additional demand for Russian bonds,” Ravil Yusipov notes. “Sanctions risks have largely lost their relevance, but there is a shortage of profitable instruments, and the fact that no limits have been selected for Russian issuers will only help this,” concludes Alexander Varyushkin.
Vitaly Gaidaev

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