A number of Western investors are afraid to participate in the purchase of Russian Eurobonds due to the imposition of EU and US against Russia sanctions, writes The Wall Street Journal with reference to the statements of the investors. However, the paper notes, they can be placed in conditions where they have little or no choice to do it or not.
If Russian Eurobonds will be included in the three indices (Emerging Market Bond Indexes, EMBI) J. P. Morgan Chase, which are the benchmarks for evaluating the government bonds denominated in U.S. dollars and issued in the emerging markets, they will attract the attention of a tracking index funds, says WSJ.
“The key will be whether they [Russian Eurobonds] is included in the indexes. It can make tracking the indexes the funds to buy bonds regardless of whether they want to do it or not”, — told the newspaper Paul McNamara, Fund Manager of GAM Holding AG.
As the newspaper notes, J. P. Morgan has a number of conditions for inclusion of government bonds in the EMBI indices. Bonds must be issued by one of the countries with emerging markets, denominated in dollars, having a maturity of more than two and a half years and assessed at least $500 million in Russian government securities that meet these criteria, notes the WSJ.
At the same time, investors will focus primarily on the investment attractiveness of the Eurobonds. “The overall picture doesn’t look very inspiring, as economic growth [in Russia] remains weak,” explained Marcelo Assalin, head of unit of NN Investment Partners. He added that it would consider bond buying if the price is attractive.
Earlier media wrote that the authorities of the EU and US have warned the banks from participation in the placement of Russian Eurobonds. The Financial Times wrote that the representatives of Brussels in private conversations with management of credit institutions urged to remember about the risk that bonds can be used to bypass the sanctions, and to take precautions. The same matter, as reported by The Wall Street Journal, concerned about the issue of placement of Russia’s Eurobonds and us authorities.
The sources said that Goldman Sachs has made an application on participation in the placement of Russian sovereign bonds, however, so that it can be revoked at any time by referring to the position of senior managers of the Bank. According to the WSJ, JP Morgan Chase has considered the possibility of application, but in the end decided not to. And Bank of America Corp., Citigroup Inc., Morgan Stanley and Wells Fargo & Co. initially said its refusal.