A ban on U.S. investors buying the Russian sovereign debt will reduce demand for the government bonds and lead to a long-term growth in the cost of ruble borrowing for the state, as reported by Rossiyskaya Gazeta with reference to the Analytical Credit Rating Agency (ACRA) study.
Anticipation of New Sanctions Adds Up to Global Trend
"The anticipation of new sanctions has added up to the global trend, i.e. the capital outflow from emerging markets due to trade wars and rising interest rates of the US Federal Reserve," Daniil Nametkin, the Analytical Center expert, shared with Rossiyskaya Gazeta.
The expert described the basic scenario of ACRA suggesting that the ban on investment in new Russian government bonds will affect the behavior of U.S. investors only as "quite optimistic." He thinks that the risk of worsening business conditions in the United States will force other foreign investors to refrain from investing in Russian bonds. "In addition, it is possible that the increase in inflation risks will force the Bank of Russia to raise the key interest rate, which is one of the main benchmarks for the government bonds market," the expert explained.
Against this background, borrowing costs for the Ministry of Finance of the Russian Federation can for a long time stay close to the highs reached in December 2016, Nametkin believes.
Source: Rossiyskaya Gazeta