Foreigners have regained a quarter of the Russian market of public debt


Foreign investors are returning to the Russian market of public debt, increasing their share in ruble-denominated government securities with a maximum of three years rate. As of 1 June this year, the proportion of non-market Federal loan bonds (OFZs) amounted to 24.5%, the highest level since September 2014, to be updated on Tuesday the statistics of the Central Bank. In may, the share of non-residents on the OFZ market increased by 1.9 percentage points — the largest increase in more than three years, follows from the data of the Central Bank. Data for the summer months yet, but events such as Brexit and the coup attempt in Turkey, only increased the interest in Russian assets. Russia has become a “magnet” for investors chasing high returns in emerging markets, said to Bloomberg last month.

In March last year, the share of nonresidents in the Russian government securities fell in the low to 17.9%, and now the foreigners are increasing their share of the OFZ for the fourth consecutive month. According to the chief economist of Alfa-Bank Natalia Orlova, even if in this indicator is the proportion of bogus non-residents (when the paper is acquired by foreign entities for the benefit of Russian citizens), it is small, and the overall data of the Central Bank reflect the real picture of foreign investors ‘ interest.

According to the National expert of a management company Andrey Velho Romana, the largest holder of Russian OFZ is the sovereign Fund of Norway government Pension Fund Global (GPFG). At the end of 2015, he belonged to the Russian state bonds on the $1.95 billion (mostly the paper ruble), follows from the data on the website of the GPFG.

Now the Russian OFZ attractive for foreigners due to the high key rate of the Central Bank in real terms, says Velho novel. According to Sberbank CIB, which leads Bloomberg, the real interest rate in Russia is 5.5%, the highest rate in the world after Belarus. The expected year-end inflation at 5-6% (the forecast of the Central Bank) and the yield on OFZ bonds at 8.5–9% positive real return on these investments is 3-4% with a duration of three to nine years, estimates Velho novel. This is a very high indicator compared to the negative rates in Switzerland, Germany, Japan, he says. Nominal volume of sovereign bonds traded with negative yields worldwide now exceeds $10 trillion.

Effect on the attractiveness of the OFZ for foreigners also provided the stabilization of the ruble this year and a recovery in oil prices, says chief economist of the Eurasian development Bank Yaroslav Lissovolik. In addition, investors are attracted to the stabilising economic performance, improvement in a number of macroeconomic parameters, he adds.

Now in the structure of foreign OFZ holders of more speculative capital, says the Deputy Chairman of Asian-Pacific Bank”, Mikhail Pavlov. In light of recent declines in oil prices in July and the weakening of the ruble (in July, the ruble has fallen by 3%) the interest of foreign investors might be suspended, says Yaroslav Lissovolik. However, in the hands of the Russian government securities will play a redistribution of investment flows from developed markets to developing after Brexit and the outflows of the competing developing countries, in particular from Turkey, said Lissovolik.

The prospects for the inflow of foreign capital into the OFZ vulnerable to the situation on the market indicates Pavlov. As part of this capital is speculative, any shocks can lead to sharp sales OFZ, he says, “but in General, most investors’ expectations that low rates in Europe for a long time.

With the participation of Ivan Tkachev