Russia Weighs Euro Debt Sale by Year-End Despite Volatility

(Bloomberg) -- Russia’s Finance Ministry still hopes to sell a euro-denominated bond before the end of the year, despite a recent surge in market volatility that it expects to continue in the fourth quarter.

“We still think it’s an opportunity,” Deputy Finance Minister Timur Maksimov said in an interview with Bloomberg TV in Moscow. “However, with all that’s been going on lately, I think we have to wait and see.”

Rocky markets due to the Covid-19 pandemic and an oil-price slump meant the government has had little opportunity to sell a Eurobond this year. Now it faces increased borrowing costs due to concern that Western governments may hit Russia with fresh sanctions over a chemical weapon attack on an opposition activist.

Maksimov said euros are now the government’s “primary market” for international debt sales after Washington barred U.S. investors last year from taking part in non-ruble debt sales from Russia.

The Finance Ministry increased its borrowing plan for the year to fund additional spending amid the pandemic, but it can fulfill all of its needs through the local bond market, he said. Higher demand for ruble debt from local banks has helped fill a gap left by a drop in interest from foreign investors, according to Maximov.

The share of foreigners in Russia’s ruble debt market declined to 29% in August from 35% in February, central bank data show. The proportion could decrease further by the end of the year in part because the Finance Ministry is mostly selling floating-rate debt instruments that appeal more to local buyers, Maksimov said.

Asked if the government might consider tapping into a surge in global interest for green bonds, Maximov said he doesn’t see any “real benefits” for Russia.

“Unfortunately, investors look more at the potential risks of buying Russian bonds than the potential opportunities,” Maksimov said. “If we see the situation change we will definitely consider this option.”

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