With the help of the strong oil price, Russia was on Wednesday going ahead with the sale of $7bn-plus in eurobonds in the biggest issue by an emerging market state since late 2009.
In a widely-expected placement, Moscow is issuing $2bn of five-year bonds at 230 basis points over US Treasuries, $2bn in 10-year bonds at a spread of 240 basis points and $3bn of 30-year bonds at 250 basis points, according to Reuters and Bloomberg.
The sale, which will cover Russia’s international borrowing plans for 2012, takes advantage of the recent strength of emerging market fixed income instruments in general and of Russia in particular.
“I have heard there’s huge demand. That’s what I am hearing,” said one investment banker following the deal.
The sale is set to be the biggest EM sovereign bond issue since Qatar sold $7 bn of bonds in November 2009, though, as FT.com reported, the Brazilian state-controlled oil group Petrobras raised $7.2bn last month.
With the yields on 30-year US Treasuries at around 3.3 per cent on Wednesday, Russia would be paying around 5.8 per cent. When Russia last issued 30-year bonds in 2000, the government paid interest at 7.5 per cent, according to data compiled by Bloomberg.
Indeed, Russia is now paying only a small premium over neighbouring Poland. Poland’s spread over US Treasuries on Wednesday was 210bp – compared to 270 for Russia.
Investors’ doubts about the economic stability of Russia under Vladimir Putin’s approaching third term have been put to rest – though that may be only for as long as oil prices hold firm.
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