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Sunday, April 20, 2014


Putin Turn to China Heralds New Look at Yuan Debt: Russia Credit 

(Sanctions denominated in dollars only work when the sanctioned country needs to settle trade in dollars.)

Apr 14, 2014 9:27 AM ET
Photographer: Andrey Rudakov/Bloomberg
The tensions surrounding Ukraine have made it more likely that Russian President... Read More
President Vladimir Putin’s turn to China amid the worst standoff with the U.S. since the Cold War is prompting companies to take a fresh look at yuan bonds.

OAO Gazprom, the world’s biggest natural-gas producer, is considering issuing yuan-denominated debt, two people with knowledge of the matter said last week. The yield on OAO Gazprombank’s 1 billion yuan ($161 million) bond due in 2017 jumped 75 basis points since Putin’s incursion into Crimea, which compares with an average yield drop of five basis points for Dim Sum bonds, Bank of America Merrill Lynch data show.

The standoff in Ukraine means Gazprom probably won’t be the last as state-controlled companies take their cue, according to UralSib Asset Management. The U.S. warned Russia last week that more sanctions may be imposed.

“This would be a curtsey in front of China,” Alexey Korolenko, who helps oversee about 45 billion rubles ($1.3 billion) of assets at UralSib Asset Management in Moscow, said by phone on April 11. “There’s a new trend of avoiding markets where there’s a risk of potential sanctions, so it’s very likely that this won’t be the only yuan bond issuance.” 

China is Russia’s largest trade partner after the European Union and the only country in the United Nations Security Council not to censure its actions in Crimea. Gazprom’s press office declined to comment on the yuan debt plan.

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