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Russia Sells $4 Billion Of Eurobonds Despite Escalating Tensions


Russia has sold $4 billion in debt on the Eurobond market in London despite rapidly escalating tensions with Britain and the West.

Global investors showed a robust appetite for two Eurobond issues Russia offered on March 16, according to the bond managers, who said they received $7.5 billion in bids -- nearly twice the amount of bonds for sale.

VTB Capital, a Russian state-owned bank that ran the books on the issue, said British investors bought nearly half of the largest, $2.5 billion issue and U.S. investors bought 20 percent of it.

VTB said U.S. investors also bought 34 percent of the second, $1.5 billion bond issue, making them the biggest buyers after Russians, who took 35 percent of the issue, even though the White House announced a new round of sanctions against Russia on March 15.

The successful bond offering came after Britain announced the expulsion of 23 Russian diplomats over the poisoning of an ex-Russian spy, and Russia vowed to reciprocate, sending relations between the two countries to a post Cold War low.

The bond offering also came only two days ahead of Russia's March 18 presidential election, which President Vladimir Putin is expected to easily win.

“The timing is fairly deliberate as a show of strength” by Russia, Kieran Curtis, a money manager at Aberdeen Standard Investments in London, told Bloomberg.

Curtis, who helps oversee about $14 billion in investments, said he is recommending that clients buy Russian debt and said he was considering buying some of the new bonds himself.

Russian Finance Minister Anton Siluanov said that the high demand from the international investors "despite not the most favorable for Russia news background" confirmed that Russia's ability to issue long-term debt has not been impaired.

He said Russia is likely to tap the global bond market again later this year.

VTB said about 5 percent of the new bonds were sold to wealthy Russians under an amnesty program authorized by Putin to induce Russian oligarchs who have stashed their wealth in British markets to bring some of it home to Russia.

Wealthy Russians with close ties to Putin face the possibility of being hit by new U.S. sanctions, giving them another reason to repatriate their cash to Russia, where it would be shielded from the reach of the U.S. or British governments, traders said.

The Russian Finance Ministry said investor demand was so strong it was able to sell the bonds at nearly a quarter percentage points below yields of 5.25 percent and 4.75 percent for the two issues that had been anticipated before the sale.

Traders said strong demand for the Russian bonds might have been spurred by Standard & Poor's recent upgrade of Russia's credit rating to a notch above junk-bond levels.

Russia's borrowing costs fell to the lowest level in four years after the upgrade on February 23.

With reporting by Reuters and Bloomberg
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