(Bloomberg) -- Russia's Finance Ministry is planning to offer Eurobonds as early as the next few weeks, shrugging off continuing Western sanctions, according to two people familiar with the plans.
The issue will be organized by Russian banks, as foreign institutions have been reluctant to participate in the wake of the U.S. and European restrictions, one of the people said. Both spoke on condition of anonymity to discuss plans that have not been made public yet. These people declined to elaborate on details, including size and currency.
“The Russian Finance Ministry has about a week or two to place Eurobonds on the best terms,” said Alexander Losev, chief executive officer at Sputnik Asset Management in Moscow, noting that the next meeting of the Federal Reserve in mid-June could sap demand by signaling further tightening in U.S. monetary policy.
Russia stands out among emerging markets as “resilient and silent” -- offering relative political stability, said Sergey Dergachev, who helps oversee about $14 billion in assets as a senior money manager at Union Investment Privatfonds GmbH in Frankfurt. The issue “should be warmly welcomed by investors,” he said.
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For the whole year, the Finance Ministry has said it plans to issue $7 billion in Eurobonds, of which $4 billion will be used to swap for outstanding debt. In 2016, Russia sold $3 billion of bonds in two tranches. The initial placement was complicated by a delay in acceptance by Euroclear Bank SA. This year's issue will be accepted from the initial offering, according to one of people.
“If it's not a straightforward Euroclear-able bond there could be a need for a premium, but considering the demand from the market, the premium won't have to be too big,” said Sergei Strigo, the London-based head of emerging-market debt at Amundi Asset Management, which oversees more than $1 trillion. “If Western banks participated it would be a lot easier.”
Traders have poured money into emerging-market debt this year after the Federal Reserve signaled it will raise interest rates only gradually. Investors added more than $1.5 billion to exchange-traded funds that buy emerging market stocks and bonds last week, the 16th consecutive week of gains.
The Finance Ministry didn't immediately respond to a request for comment on its plans regarding Eurobond issuance.
The May 2026 bond sold last year has rallied, cutting the yield 45 basis points to 4.01 percent in 2017. Russia has enjoyed investor favor this year thanks to higher prices for oil, its main export. Finance Minister Anton Siluanov said last week the budget deficit will be 2.1 percent of gross domestic product in 2017, lower than the 3.2 percent seen in the beginning of the year.
--With assistance from Ksenia Galouchko Lyubov Pronina and Natasha Doff
To contact the reporters on this story: Anna Andrianova in Moscow at aandrianova@bloomberg.net, Evgenia Pismennaya in Moscow at epismennaya@bloomberg.net.
To contact the editors responsible for this story: Gregory L. White at gwhite64@bloomberg.net, Torrey Clark at tclark8@bloomberg.net, Paul Abelsky
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