Russia may do yuan bond sales because of possible US sanctions on its debt markets

2-MIN READ2-MIN

The Bank of China is one of two Chinese banks being tapped for a yuan bond sale by Russia. Photo: Reuters

Published: 1:16am, 1 Dec 2017Updated: 1:16am, 1 Dec 2017

Russia’s Finance Ministry has hired banks to organise its first-ever sale of yuan bonds as the government braces for possible US sanctions on its sovereign debt markets.

Russia hired Bank of China Ltd, Gazprombank and Industrial & Commercial Bank of China Ltd to arrange investor meetings for the sale of 6 billion yuan (US$907 million) in five-year notes, according to people familiar with the plans. The issuance is slated for the end of this year or beginning of 2018, they said, speaking on condition of anonymity because the deal is not yet public.

The press office of Russia’s Finance Ministry declined to comment.

The sale has been under discussion since US and European sanctions in 2014 over the takeover of Crimea blocked many state-owned Russian companies’ access to Western capital markets.

People walk past an outlet of Chinese bank ICBC in Beijing, which is being tapped for a possible Russian yuan bond sale. Photo: AFP

A report due next quarter from the US Treasury on the potential consequences of extending penalties to include Russian sovereign debt has increased pressure on the Finance Ministry to seek out alternative means of borrowing.

“It would be wise of Russia to tap the yuan market now,” said Vladimir Miklashevsky, a senior economist at Danske Bank A/S in Helsinki. “China remains Russia’s biggest trade partner, China’s enormous financial system has lots of buying potential, too.”