Spitting in the face of US dollar dominance Russia unveils plan to sell $1bn of yuan bonds

Russia unveils plan to sell $1bn of yuan bonds

Russia plans to sell equivalent to $1 billion in yuan-denominated bonds to attract Chinese investments in a strategy meant to cushion it against possible US sanctions on its sovereign debt markets.  
Russia plans to sell equivalent to $1 billion in yuan-denominated bonds to attract Chinese investments in a strategy meant to cushion it against possible US sanctions on its sovereign debt markets.  

Russia says it will start selling yuan-denominated sovereign bonds to Chinese investors for the first time in what appears to be a strategy to provide a new source of funding at a time that relations with the West have become soured over political disputes.  

Russia’s Finance Minister Anton Siluanov was quoted by the country’s media as saying that the related discussions over issuing the yuan-based bonds had already been conducted with Chinese partners.

“We held the talks with our Chinese partners but we did not plan the issue this year … It is possible and it is most likely that we will test this path next year,” he was quoted as saying by Sputnik news agency.

Previous reports said that the Russian government would start issuing the equivalent of $1 billion in five-year yuan bonds and that the sale could take place in Moscow.

On a related front, Russia’s Deputy Finance Minister Vladimir Kolychev emphasized that the Chinese side showed interest in the instrument, adding that “what exactly is certain is that this will be a liquid benchmark, and this will be a curve, not the single issue.”

Sputnik further added in its report that the Russian Finance Ministry had originally planned to issue such a tool on the domestic market with a volume of $1 billion for Chinese investors last year.  However, the plans to that effect had not been realized due to the Chinese currency regulations, it added.

Also, Bloomberg in a report on November 30 said Russia’s Finance Ministry had hired banks to organize its first-ever sale of yuan bonds.

It said the banks involved were Bank of China Ltd., Gazprombank and Industrial and Commercial Bank of China Ltd.

The move, Bloomberg added, would be meant to cushion Russia against possible US sanctions on its sovereign debt markets.

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, it wrote in its report.

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, Bloomberg added.

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