Russia Celebrates Sanctions Anniversary with Record Ruble-Bond Sale 

(Bloomberg) -- Russia notched up its latest debt-sale record, seizing on appetite from yield-hungry investors in a placement that underscored how sanctions concerns are ebbing a year after U.S. penalties hobbled local markets.

“The domestic and international environment has turned benign,” said Richard Segal, a senior emerging-markets analyst at Manulife Asset Management in London. “The European and U.S. monetary policy outlook has changed abruptly and the U.S. Congress has ‘sanctions fatigue.’"

Wednesday’s auctions were the latest in a string of record-breaking local debt offerings in Russia this year as a dovish tone from central banks around the world fuels a broader rally across emerging markets. With investors lured toward higher-yielding assets, Russia is proving a favorite as the price of crude oil, its main export earner, trades above $70 per barrel.

  • The Finance Ministry placed more than 137 billion rubles ($2.1 billion) of 10- and five-year bonds, with total demand approaching 200 billion rubles
  • It netted its biggest sale for a single auction with 86.8 billion rubles of the 2029 notes placed at a one-basis-point premium to the previous day’s close
  • The 2024 bonds were sold with a cutoff yield that was a basis point below Tuesday’s closing level

A year ago, Russia’s markets were tumbling after shock U.S. sanctions paralyzed one of the nation’s biggest companies. As the rout resumed in the summer, the ministry was forced to ax a string of auctions. Now the ruble is the best-performer globally so far this year and Russia’s local bonds have handed investors a return of 11.4 percent, the most among emerging-market peers.

“Foreigners have been returning to Russia this year after last year’s sanctions-related volatility,” said Paul McNamara, investment director at GAM (U.K.) Ltd.

Impetus for tougher penalties targeting Russia’s sovereign bonds and biggest banks is losing steam. According to Republican Senator Marco Rubio of Florida, the sponsor of one of the bills aimed at Russia, plans to punish Moscow for meddling in the 2016 elections are encountering “sanctions fatigue.”

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