{"id":641547,"date":"2013-02-07T07:02:21","date_gmt":"2013-02-07T12:02:21","guid":{"rendered":"http:\/\/blogs.reuters.com\/globalinvesting\/?p=8568"},"modified":"2013-02-07T07:02:21","modified_gmt":"2013-02-07T12:02:21","slug":"clearing-a-way-to-russian-bonds","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/641547","title":{"rendered":"Clearing a way to Russian bonds"},"content":{"rendered":"

Russian debt finally became Euroclearable today.<\/p>\n

What that means is foreign investors buying Russian domestic rouble bonds will be able to process them through Belgian clearing house Euroclear, which transfers securities from the seller’s securities account to the securities account of the buyer, while transferring cash from the account of the buyer to the account of the seller. Euroclear’s links with correspondent banks in more than 40 countries means buying Russian bonds suddenly becomes easier.And safer too in theory because the title to the security receives asset protection under Belgian law. That should bring a massive torrent of cash into the OFZs, as Russian rouble government bonds are known.<\/p>\n

In a wide-ranging note entitled “License to Clear” sent yesterday, Barclays reckons previous predictions of some $20 billion in inflows from overseas to OFZ could be understated — it now estimates that $25 to $40 billion could flow into Russian OFZs during 2013-2o14. Around $9 billion already came last year ahead of the actual move, Barclays analysts say, but more conservative asset managers will have waited for the Euroclear signal before actually committing cash.<\/p>\n

Foreigners’ \u00a0increased interest will have several consequences.\u00a0 Their share of Russian local bond markets, currently only 14 percent, should go up. The inflows are also likely to significantly drive down yields, cutting borrowing costs for the sovereign, and ultimately corporates. Already, falling OFZ yields have been driving local bank investment out of that market and into corporate bonds (Barclays estimates their share of the OFZ market has dropped more than 15 percentage points since early-2011). \u00a0And the increased foreign inflows should act as a catalyst for rouble appreciation.<\/p>\n

Each of these points in a bit more detail:<\/p>\n

a) Foreigners’ share of the Russian bond market is among the lowest of major emerging markets.\u00a0 Compare that to Hungary, where non-residents own over 40 percent, or South Africa and Mexico, where foreigners’ share of local paper is over 30 percent.<\/p>\n

\"\"<\/a><\/p>\n

b) Foreign buying last year compressed Russian yields sharply, eventually pushing down 10-year yields by 130 basis points over the year as foreigners moved further along an increasingly flattening curve.\u00a0 But Russian 10-year yields around 6.5 percent will remain attractive to foreigners, comparing favourably with most other emerging markets.\u00a0 And at home, falling government bond yields will benefit the economy as a whole as local banks change their focus. Barclays write:<\/p>\n

\n

(Falling yield) provides cushion to the (finance ministry) which plans to borrow 1.2 trillion roubles internally, versus 0.9 trillion last year. This also accommodates the reallocation of Russian banks\u2019 portfolios\u00a0 from OFZ into retail lending and corporate and municipal bonds\u00a0 driven by higher returns.<\/em><\/p>\n<\/blockquote>\n

c) Barclays advises clients to buy 10-year OFZs in anticipation of further gains, and suggests doing this on an unhedged basis to take advantage of potential rouble appreciation.\u00a0 While the rouble has outperformed other emerging currencies in the past year, Barclays expects the outperformance to continue.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Russian debt finally became Euroclearable today. What that means is foreign investors buying Russian domestic rouble bonds will be able to process them through Belgian clearing house Euroclear, which transfers securities from the seller’s securities account to the securities account of the buyer, while transferring cash from the account of the buyer to the account […]<\/p>\n","protected":false},"author":7384,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-641547","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/641547","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/7384"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=641547"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/641547\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=641547"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=641547"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=641547"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}