Russia bond garners acceptance by key clearing house

28 July 2016
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Russia’s first sovereign Eurobond is now available on Euroclear, the world’s largest clearing house – a full two months after the bond was placed, Russian officials say.

“Yes, everything is OK, they started servicing it today,” Konstantin Vyshkovsky, head of the finance ministry’s debt department, told Interfax on Thursday. Finance minister Anton Siluanov said the negotiations with Euroclear were difficult. Euroclear declined to comment, writes Max Seddon in Moscow.

The news is a triumph for Moscow, which had made its first international placement since the US and EU restricted its access to capital markets over the Ukraine conflict in 2014. Clearing houses initially declined to place the 10-year, $1.75 billion bond, despite the attractive initial 4.75 per cent yield, over fears of potential fallout over Western sanctions. The bond was only available on Russia’s National Settlement Depository, frightening away many Western investors.

“Unprecedented pressure was put on Euroclear,” Mr Siluanov said at the time. “Essentially, we are dealing with rule by telephone, when investors and servicing organizations have it decided whether they’re going to participate in the issuance or not by the State Department and US administration.”

Russia attempted to herald the bond as a first triumphant return regardless. VTB Capital, the bond’s sole issuer, whose parent bank VTB is itself under sanctions, claims that well over 70 per cent of the issuance was bought by foreign investors, despite the difficulties of buying through the Russian issuer.

The bond’s yield fell to nearly 4 per cent on the news. “The initial placement went successfully, and now that Euroclear has agreed to service the paper, we can expect a higher liquidity of Eurobonds on the secondary market,” said Eddie Astanin, chairman of the National Settlement Depository.

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