Merrill Lynch: New US sanctions on Russia possible shock for 2018

Baku. 15 December. REPORT.AZ/ Extended U.S. sanctions on Russia that cause foreign investors to pull out of its bond markets is a potential shock event for 2018 that could trigger big rouble falls. 

Report informs citing the Reuters, Bank of America Merrill Lynch said.

“Pressure could be material and will likely depend on the scale of the imposed sanctions. More specifically, an attempt to fully cut off Russia from external capital markets could trigger renewed demand for (hard currency), similar to the spike in such demand in late 2014”, - document says.

Curbs imposed in 2014 to punish Russia for its annexation of Ukraine’s Crimea region bar investors from buying new securities from several companies and banks associated with the states. Several individuals are also under sanction.

But the United States is now considering restrictions also on buying rouble-denominated government bonds, known as OFZs.

BAML predicted such a development would send Russian yields 100-150 basis points higher, noting foreigners currently hold almost $37.2 billion worth of OFZs - a third of the market.

Another $14.5 billion of external sovereign debt is held by non-resident investors, it estimates.

External debt issued by Russian companies and banks - currently worth some $450 billion, also is likely to come under pressure if the sovereign comes under sanction, the bank added.