Bond strife – Newspaper Kommersant No. 196 (7397) dated 10/21/2022

Debt financing for Russian companies is becoming more expensive – after September 21, risk premiums on their debt securities rose to the level of April, while the largest increase was observed on securities with a lower rating, ACRA reports. Compared to the spring recession, this time the agency expects a less deep and prolonged market drawdown, noting, however, that in order to restore the volume of placements and activity on it, removal of geopolitical risks will be required.

The announcement of a partial mobilization at the end of September caused a sharp increase in yields on bonds of Russian issuers: the values ​​of the indices of high-yield bonds and the broad bond market returned to the levels of April, more than doubling, according to a study by the ACRA rating agency, although in mid-September these indicators fell from March peaks of 2500 and 1300 basis points (25 and 13 percentage points, respectively) – up to 700 and 460 basis points (bp). The maximum values ​​of risk premiums for bonds occurred at the end of March and the beginning of April 2022, when the key rate was at historical highs.

At the same time, the growth of bond yields is not uniform and depends on the issuer’s rating: the average growth of the risk premium for each grade of the credit rating increased by 37% (from 62 to 85 bp). Thus, after September 21, 2022, the values ​​of spreads for government bonds on corporate securities in the highest rating category “AAA–AA” increased by 46.8 bp on average. p. (plus 44%) compared with the values ​​of risk premiums at the beginning of September. This category accounts for about a third of the issues; companies with state participation are also concentrated here, the risks for which are reduced due to the possibility of obtaining state support. As a result, spreads for most securities of this category did not exceed 300 bps. p., and for securities with a maturity of five years even decreased by an average of 17 bp. P.

In category “A”, the average spread after September 21 increased by 105.7 bp. p. (plus 35%), while before September 21, spreads were on average 180 bp higher. p. than the category “AAA-AA”, then after September 21 – by 217 bp. In the BBB category, the spread increased by 170.6 bp. (plus 30%), now it exceeds the average spread of category “A” issuers by 325 bp. p. (until September 21 — by an average of 260 bp). In the BB-B category, the average spread has increased by 335.8 bps since September 21. (plus 46%), risk premiums for such securities by 400–600 bp. points exceed the yields on securities with a rating of “BBB” (before September 21, the difference was 170 bp).

A more pronounced increase in spreads for securities with lower ratings may indicate increased refinancing risks for such issuers over a six-month horizon, and is also associated with higher risks of liquidity shortage for such issuers and their less resistance to shock events in the economy compared to companies from high According to ACRA, investors expect the market situation to stabilize in the long term for issuers of very high rating categories, while there is no narrowing of spreads in the long term for bonds of issuers with lower rating levels.

In general, the agency does not expect a recovery in activity in the debt market until the stabilization of the geopolitical situation – investors will be more accurate in assessing risks due to the difficulty of predicting future financial results of companies. However, in the absence of sharp changes in macro indicators, the market drawdown now may not be as deep and prolonged as in the period from February to July 2022, the agency believes. If only 11 issues were placed in March against 57 a year earlier, and the volume of placements amounted to 30.2 billion rubles. against 152.7 billion rubles, then by September the figures were almost equal (this was facilitated, among other things, by the reduction of the Central Bank rate to the level of December last year – 7.5%).

Tatyana Edovina