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Back on the Market: Russian Bonds

Moscow tests the waters for the first time since 1998

Rising oil prices have lifted the economy out of recession

Moscow is returning to the credit markets for the first time since the economic crisis of 1998, when the Russian government devalued its currency and defaulted on debt. Officials including Deputy Finance Minister Dmitry Pankin visited the U.S., Europe, and Asia earlier this month to drum up investor interest in the bonds. The first sale was expected on Apr. 22; the government is seeking to borrow as much as $17.8 billion this year.

The timing is propitious: Thanks in part to a rally in oil, Russia's biggest export, the country's economy is recovering from its worst recession since the collapse of the Soviet Union. The World Bank estimates economic growth will hit 5.5% in 2010. And analysts predict Russian corporate profits will soar this year and next as oil prices continue to climb. Earnings for companies in the Micex Index will rise 97% during the period, as crude climbs to an average of $87 a barrel in 2011 from $82.59 today, based on projections compiled by Bloomberg.

The biggest beneficiaries of the debt sales may be Russian markets, as Moscow's ability to raise funds boosts confidence. Says Liam Halligan, chief economist at Prosperity Capital Management, which has $4.2 billion invested in Russia: The sales "could lead to the beginning of a reappraisal across a whole variety of Russian asset classes through corporate bonds and into equities."

The bottom line: In the wake of the government's debt sales, Russian companies may find it easier to attract buyers for their stocks and bonds.

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