By Andrei Skvarsky
Russian finance officials are meeting investors in London and Singapore today to market Russia’s first sovereign Eurobond issue since 1998, with analysts saying there is a high appetite for the issue as the risk of a Russian default on loans is at an all-time low.
Natalia Orlova, chief economist at Russia’s Alfa Bank, argues that Russia has no pressing fiscal need for borrowing and that the purpose of the dollar-denominated Eurobond issue is “to take advantage of the opportunity to borrow cheaply now and spend the money later”.
Strong demand is likely to put yields at between 4.5% to 5.5% for 10-year bonds, Orlova said.
Russia’s total state debt is one of the lowest among both emerging-market and developed countries, equal to 6.9% of GDP. The country’s market is awash with short-term liquidity but lacks long-term funding, and going to international capital markets appears to be the only solution.
Russia expects its Eurobond issue to bring 10 billion to 18 billion dollars in 2010, Orlova added, citing a government memorandum. This would boost Russia’s foreign debt, nearly all of which is today covered by the country’s foreign reserves, by between 30% and 50% from the current extremely low level of 30 billion dollars. Alfa Bank believes, however, that Russia is unlikely to place the entire amount this year.
Investors said the equity market was also benefiting from the positive vibes from the sovereign road-show with the Micex Index of leading shares increasing 1.5% today.
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