Issuers did not go on vacation – Newspaper Kommersant No. 161 (7362) dated 09/02/2022

The holiday season and the decline in business activity had little impact on the Russian debt market. Companies and banks were actively issuing bonds, raising a record amount of almost 460 billion rubles for this, there were landmark placements in yuan of Rusal and Polyus, as well as replacing Eurobonds of PIK and Sovcombank. Such issues could become a new factor in the growth of the Russian market, and their total volume could double to $30 billion by the end of next year.

Despite the peak holiday season and low business activity, in August corporate borrowers attracted a record volume of funds this year on the debt capital market. According to the agency Cbonds, 66 placements were made for a total amount of almost 460 billion rubles. This is the highest result since December 2021 and is almost one and a half times higher than the volume of placements in August last year.

The increase in issuer activity in the last month of summer this year was due to the almost complete closure of the market in the spring months, when an overhang of supply formed. “Thanks to the policy of the Bank of Russia to reduce the key rate and the availability of free liquidity, issuers can count on the successful placement of their bonds at rates that are acceptable to them,” says Denis Leonov, head of the debt capital markets department at BCS Global Markets.

High demand from investors is a consequence of excess ruble liquidity in the market and expectations of further easing of monetary policy, Pavel Vintin, director of investment banking services and capital markets operations at Rosbank, also emphasizes.

At the same time, technical placements of a number of significant issues took place in August. Rusal and Polyus placed on the stock exchange three issues of bonds in yuan for a total of 8.6 billion CNY (almost 77 billion rubles). “Investors seek to diversify their investments with the currencies of friendly countries, despite the fact that at the moment there is a clear shortage of instruments for investing in yuan. This allowed Rusal and Polyus to place bonds with multiple oversubscriptions and a minimum yield premium to the sovereign curve of China,” said Dmitry Gritskevich, head of analysis of banking and financial markets at PSB.

“Bonds in yuan are in good demand among Russian investors due to the lack of alternatives for placing yuan on the market for a long time, the growth potential in this segment remains,” says Mr. Vintin.

Significant were the first placements of bonds replacing Eurobonds blocked in Euroclear. PIK-Corporation placed securities for $395 million (almost 24 billion rubles). Their payment was made in Eurobonds or in cash, the intended use of which is the purchase of Eurobonds. On August 8, Sovcombank began issuing $600 mln replacement subordinated bonds through a closed subscription. According to Mr. Gritskevich, the placement has not been completed at the moment.

In the coming months, it is currency bonds that can become the market driver. According to Denis Leonov, further de-dollarization carried out in the Russian Federation will contribute to this. “Currently, placements in the yuan are perceived by both issuers and many investors as a new form of Eurobonds, so this instrument in the long term will gradually occupy the share previously occupied by Eurobonds,” notes Mr. Leonov. The development of the yuan bond market can be spurred by the placement of such securities by the Ministry of Finance, which will become a benchmark for the market.

However, while settlements are being carried out in dollars and euros, we can expect local placements in these currencies, both replacement and new launches. In particular, according to Dmitry Gritskevich, exporters can enter the market with local currency securities. At the moment, the volume of the market for local currency bonds is about $15 billion, while the volume of the market for corporate Eurobonds is about $90 billion. By the end of next year, Mr. Gritskevich believes, its volume may double and reach $30 billion.

Vitaly Gaidaev