Experts: a full-fledged return of non-residents to the Russian debt market is still impossible

MOSCOW, 15 Aug – The US Treasury has given permission to banks to resume trading in Russian debt,

and this will not be a violation of the sanctions, but a full return of non-residents from unfriendly countries to the Russian debt market is not yet possible, according to interviewed experts.

Reuters earlier on Monday, citing a number of sources, reported that the largest foreign investment banks are cautiously returning to the Russian debt market. According to the agency, in recent days, some major Wall Street banks have begun offering assistance to their investors in the sale of Russian debt, specifying that they are JPMorgan Chase & Co, Bank of America Corp, Citigroup Inc, Deutsche Bank AG, Barclays Plc and Jefferies Financial Group Inc.

“In fact, this is a continuation and expansion of the news from July 27, when OFAC explained that US residents will be able to buy units of funds with assets from the Russian Federation, and will not be considered a new investment if Russian assets do not prevail in the fund’s shares. The news means that The US regulator has given permission to US banks to resume trading in debt, and this will not be a violation of sanctions for the reasons indicated above,” commented ITI Capital’s chief investment strategist Iskander Lutsko.

“Many unfriendly non-residents are stuck in Russian assets after the restrictions that the US regulator introduced earlier, and now it will be possible to sell them to the market, but only for holders through Euroclear. Therefore, good news for investors, as there will be more liquidity and issues to buy through Euroclear,” he adds.


Alexander Afonin, head of the bond market analysis at Sinara investment bank, believes that due to the current restrictions, a full return of non-residents to the Russian debt market is not yet possible, so the appearance of securities in the hands of non-residents and pressure on the market is unlikely. The point here is not only in legislative restrictions but also in infrastructure ones, he explains.

“In particular, investors still do not have the opportunity to directly transfer securities between Western depositories and Russian NSD, and the Central Bank has imposed a six-month quarantine on various kinds of transfer attempts through depositories in friendly jurisdictions in order to prevent speculation. In fact, foreign investors are cut off from our domestic market,” he explains.

“Of course, they can make deals with each other, but the law allows American investors to make deals aimed only at reducing their positions in Russian securities. It is possible that foreign banks can buy Russian securities in the interests of some institutional investors who will hold them with the prospect of waiting for the restoration of ties and receiving payments on securities in full,” the expert adds.

Lutsko draws attention to the fact that the share of friendly non-residents is very limited, mostly over 80% of all non-residents belong to the unfriendly. The main volume of unfriendly investments is in OFZ, in corporate papers, the main share of ownership is among residents, he points out.

“It is technically difficult to deliver bonds of Russian issuers from friendly jurisdictions since the bridge is broken,” the expert sums up.

US, Economy, Russia, Euroclear,

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