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. Last Updated: 07/27/2016

State Set for $1Bln Bond Sale




Russia plans to sell as much as 2 billion Deutsche marks ($1.09 billion) of seven-year bonds next week, according to bankers involved in the sale.


The bonds will be sold Monday through underwriters led by SBC Warburg Dillon Read and Deutsche Morgan Grenfell, they said.


The bonds are expected to yield 450 to 485 basis points more than seven-year German government bonds. Seven-year German government bonds currently yield 4.67 percent.


An outstanding issue of 9 percent Russian Finance Ministry bonds due in 2004 is currently estimated to yield 9 percent, according to Bloomberg analytics. When those bonds sold a year ago, their yield was set at 370 basis points more than German government bonds due in 2004.


The bonds carry junk bond ratings of "Ba3'' by Moody's Investors Service and "BB-'' by Standard & Poor's Corp.


The upcoming tranche had been delayed for six months after falling Asian currencies led investors to perceive higher risk in other currencies, such as the ruble, and to sell Russian debt.


Now investor confidence in Russian debt and the ruble is returning after the passage of a leaner budget, and a stable ruble allowed the central bank to lower interest rates this week, its third cut this year.


"The market has misperceived Russian risk on all fronts,'' said Peter Boone, joint head of research at Brunswick-Warburg in Moscow. "We'll see perception catch up later on.''