The Aries structured bonds sold by Germany and backed by Russian sovereign debt jumped in value on Tuesday after Standard & Poor’s upgraded their credit rating by eight notches after the clearance of Russia’s Paris Club debt.

Russia paid $22bn in debt owed to countries including Germany on Monday after a deal for early payment of Paris Club debt struck in June.

Germany owed €7.7bn, the largest portion of the debt, had been a reluctant signatory as it had used the funds owed by Russia to issue the Aries notes in 2004 to support its own finances.

S&P upgraded the bonds, which are split into three tranches, from BBB to AAA yesterday. “The upgrade reflects the fact that the credit event of Russia defaulting on its Paris Club debt to Germany can no longer be triggered,” the agency said.

The news led to strong demand for the Aries notes, which saw the yields on the longest-dated among them pushed to 10-month lows.

The yield on the 2014 Aries notes fell 5.8 basis points to 5.29 per cent, the yield on the 2009 notes was 7.6bp lower at 3.89 per cent, while the 2007 notes were yielding 6.5bp less at 3.52 per cent.

Timothy Ash, analyst at Bear Stearns, said S&P had obviously concluded Russia was unlikely to take out new bilateral obligations from Germany: “The question now is whether Germany, flush with the cash from the early Paris Club payment, will look to buy back Aries [notes], given that these are relatively high yielding.”

The Aries notes, issued by KfW, the German development bank, were now close to pure German government risk, he added.

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