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Russian Debt Highly Popular Due to High Real Interest Rate, US Investor Says

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Banknotes and coins of Russia - Sputnik International
WASHINGTON (Sputnik) - Russian debt continues to be very attractive among investors because of its real interest rate, Navigator Principal Investors Director Kyle Shostak told Sputnik.
"Russian debt remains highly popular amongst investors due to the high real interest rate (about 2 percent net of inflation)," Shostak said. "The rouble-denominated OFZ bond market is roughly 35% owned by foreigners."

Shostak said Russia's share in JPMorgan’s GBI-EM index, the main global benchmark for emerging market local currency bonds, has also grown to 8.3% from near 7% a couple of years ago and just 1.5% in 2007.

The investor added that Russian bonds earned more than 20% and equities more than 40% last year, while Russia’s debt-to-GDP ratio is expected to be just 20% this year, less than a fifth of that of the United States, Britain or France and under a third of China’s, thus remaining one of the strongest public balance sheets in the world.

"Any worsening in Russia's stand in the West (Georgia, Ukraine, Skripal, and now Navalny) in the past has led to the weakening of the bond but also an opportunity for investors to get in cheaper," he said. "The trend, if it can be of any guidance, has shown that the Russian assets always traded back very nicely."

Commenting on possible sanctions policy of the new US administration towards Russia, Shostak stated, "The most damaging effect will be seen if the US will introduce a ban on owning Russian debt or Russian banks being cut off from the SWIFT global payment system."

"At the moment such risk remains high but not something that the new administration will rush to implement regardless," he said.

Last year, lawmakers introduced a measure targeting Russia’s sovereign debt and banks. The legislation also calls for sanctions on Russian-owned energy projects outside the country. Kremlin spokesman Dmitry Peskov said the legislation was aimed at forcing competitive Russian companies out of the market. Russia has repeatedly rejected accusations of interfering in the domestic affairs of other countries.

Democratic Party candidate Joe Biden was projected as the winner of the presidential election by all major US networks and media outlets this weekend. Trump, however, has filed several legal challenges and refuses to concede.

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