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Marcus Ashworth

Russia's Smoldering Bond Romance

Debt has room to gain as punchy yields and rate cuts keep the party going.

Russia was one of the best trades of 2016 by a country mile. A strengthening ruble supercharged foreign interest in domestic Russian government bonds, pushing yields down to around 8 percent from 12 percent in mid-2015. Contrary to appearances, there's still some room to run. 

There's a realistic chance that inflation will cool to the Russian central bank's 4 percent target. That equates to an inflation-adjusted real return of about 4 percent for holding Russian debt -- a rare sight for most bond markets.