Russian Eurobond Experiment Finally Pays Off With Euroclear NodBy and
May 2026 dollar bond jumps most since placement, yield tumbles
Ashmore’s Dehn says decision could clear way for further sales
Investors who bought into Russia’s rogue Eurobond two months ago are having their bets vindicated after the country overcame the last stumbling block to the sale’s success.
Euroclear Bank SA, the world’s biggest bond clearing system, admitted Russia’s 2026 Eurobond for settlement starting on Thursday, removing a key barrier to foreign access after the notes were sold amid concern international sanctions would block ownership. The bonds surged the most since they were issued after the decision and Alexey Korolenko, a money manager at UralSib Asset Management, says the rally may continue.
“The yield could fall another 20 to 30 basis points,” said Korolenko from Moscow, who bought the new Eurobond during its initial placement and still holds them. “I counted on Euroclear eventually giving permission.”
Rewind to May, and that endorsement was looking far from imminent.
Foreign banks, including Goldman Sachs Group Inc., gave the bond deal a wide berth after the U.S. and European Union warned the funds raised could be channeled to sanctioned companies. Once the sale finally went ahead with a state bank as its lone organizer, Russian Finance Minister Anton Siluanov blasted the State Department, alleging officials had called up investors and clearing houses and told them to steer clear of the $1.75 billion sale.
The May 2026 bond surged 2 percent on Thursday, cutting the yield by 25 basis points to 4.12 percent as of 6:59 p.m. in Moscow. That pushed the yield on the note below the rate of 4.28 percent on dollar bonds maturing two years later, data compiled by Bloomberg show.
“Clearly this is good news for Russia,” said Jan Dehn, London-based head of research at Ashmore Group Plc, which manages about $51 billion in emerging markets. “They should now be able to issue similar structures without the delay, provided it is not a one-off exemption. Whether they will remains to be seen.”
As well as its important symbolic value for the Kremlin, Euroclear’s move potentially opens the way for further foreign issuance, which can go as high as $3 billion this year under budget rules.
Whether Russia actually needs the money to help cover the budget deficit is a different matter.
The potential foreign borrowing is dwarfed by funding the government has already put in motion as it doles out cash from a $40 billion wealth fund, sells off state stakes in some of its biggest companies and plans to quadruple local debt issuance to $20 billion next year, according to ING Groep NV chief economist for Russia Dmitry Polevoy.
In May, Polevoy had pointed out that Euroclear’s delay in clearing the Eurobonds was on shaky ground because the sovereign isn’t subject to the sanctions over Ukraine, while recommending the securities to clients.
The Finance Ministry “doesn’t understand why this process took so long,” Deputy Minister Maxim Oreshkin said after Euroclear’s decision.
President Vladimir Putin has sought to minimize the impact of penalties imposed in 2014 over the conflict in Ukraine which kept some of the nation’s biggest companies locked out of international debt markets.
Before Thursday’s decision, foreign investors could only buy the new bond if they had an account with Russia’s National Settlement Depository. Most international bondholders don’t have one because Russian sovereign bonds are normally also accessible via Euroclear.
“Russia might see more new issuance, but the Russians might be worried that the U.S. government would then react with countermeasures to close the loophole,” said Timothy Ash, a strategist at Nomura International Plc in London. “They might play the PR victory, but still hold back from using this as a major financing angle.”
— With assistance by Vladimir Kuznetsov, and Olga Tanas