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Suddenly, the national debt of Russia was under US control

Внезапно — госдолг России оказался под контролем США

Russian debt came under the control of the United States and several other Western countries due to the fact that there is an active sale of gobongo, but buy them in “NATO countries”.


Foreign banks and funds once again increasing their activity in the market of Russian government debt by buying government bonds of the Russian Federation in a record in the history volumes.

After the summer break, which provoked adopted in the US law on sanctions, in September, non-residents resumed investing in government securities of the Russian Federation — for the month investments amounted to 149 billion rubles, follows from statistics of Bank of Russia.

The inflow of foreign capital 10% exceeded the level of August and almost 6 times the rate of July. Only once in the history of the non-residents bought more in March 2017 from the market it’s 196 billion rubles.

Quarterly average price purchases was unprecedented for the Russian market of government debt — foreigners invested in the securities of the Ministry of Finance 312 billion and accounted for three-quarters of the amount the government raised in the Federal budget on the market (423 billion).

In October, according to preliminary estimates, the Central Bank purchases slowed to 14 billion rubles. Despite this, cumulatively from the beginning, from nerezidentov it is 680 billion rubles, or of 11.72 billion, which is 1.5 times more than last year’s investment, which was already a record in the history.

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On 1 November, foreign investors held ruble-denominated debt of the Russian government on the 2.2 trillion rubles, their share in the market has reached a new record high at 33.2%.

In fact, the proportion of foreigners is much more, says the analyst Prosveshenya Roman Nasonov: the figure which gives the Central Bank takes into account non-liquid OFZ issues (such as those issued to support the banking sector in 2014-15). In the same securities that are traded on the Moscow stock exchange, non-residents have de facto control of the market.

“The share of foreign investors in liquid issues with a fixed coupon greater than 50%, and in the far part of the curve (long-term bonds — ed.) — 70%,” — said Nasonov.

This is a record high even by the standards of emerging markets, among which the Russian gives one of the highest yields for operations carry-trade, noted in the review of analysts of Bank “St.-Petersburg: in Brazil, where the Central Bank also pursues the policy of high interest rates, attracting foreign speculative capital to support the national currency, the share of foreigners is not more than 13%.

The more foreigners in the market — the more he is sensitive to the risks of a sudden deterioration in sentiment, explains currency strategist at Sberbank CIB Tom Levinson: the most serious is the risk of sanctions from a complete ban on investments in Russian debt.

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The bill, the U.S. Treasury must prepare to March. The head of the CBR Elvira Nabiullina said that even if sanctions are adopted, yields of government securities will increase by only 0.4-0.5 p. p., and all sell foreigners “with pleasure,” buy Russian banks.

To accept this difficult, says the analyst of FC “URALSIB” Olga Sterol: in her estimation, if there is a ban on purchase of new government bonds, OFZs will take approximately 10% of the investment, or 200 billion.

The sale of BFL and the growth of capital outflow will lead to the weakening of the ruble by 15%, which may force the Central Bank to raise the key rate,” warns of Sterols.

The risks are that this will start a chain reaction: sale some investors will trigger a reset of other securities. In an extreme case, the Central Bank will have to enter the market and start buying government bonds, as it was in 2007-08 gg, says the analyst of Raiffeisenbank Denis Poryvai.

“Time is running out, and investors are nervous. Of course, the “ban” local debt — it would be tantamount to breaking bomb,” notes portfolio Manager at MC “Raiffeisen Capital” Constantine Artemov. However, while in this scenario the market does not believe, says Poryvai from Raiffeisenbank.

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