MOSCOW, May 27 (Reuters) – The Russian debt market is sufficiently resilient to potentially tougher Western sanctions against Moscow, given the recent decline in foreign investors’ holdings of Russian debt, the central bank said Thursday.
The share of foreign investors among holders of Russian OFZ Treasury bonds fell to its lowest level since mid-2015 in April, when the United States imposed new sanctions on Russia.
The new sanctions ban U.S. banks from buying Russian ruble-denominated sovereign debt from mid-June in addition to the current ban on buying sovereign Eurobonds directly from Russia.
“The potential for tougher penalties may prompt investors to take further action. However, even if they become more severe, the overall impact of the sanctions is considered short-lived and limited due to the strong fundamentals of the Russian market, ”the central bank said.
US investors were the main foreign holders of OFZ on April 1, followed by UK and Belgian investors.
Foreign investors’ holdings of OFZ bonds, which Russia is using to fill budget holes, declined by 334.6 billion rubles ($ 4.56 billion) between early 2021 and April 23, the bank said. central in a financial stability report.
Their share slipped to 18.7% as of April 23 from 20.2% at the end of March, the central bank said.
Ruble-denominated OFZ bonds were once popular among foreign investors because of their lucrative returns, given Russia’s investment ratings. The decline in the share of non-residents among OFZ holders had a limited impact on prices, as the major Russian banks replaced foreign investors.
Data from the central bank showed that US and UK investors were the main sellers of OFZ bonds in the first quarter, while Chinese investors increased their holdings of bonds, which the Ministry of Finance typically auctioned off every Wednesday.
The central bank called OFZ’s ownership changes diversification, saying bonds were still attractive to foreign investors. (Reporting by Elena Fabrichnaya; Writing by Andrey Ostroukh; Editing by Giles Elgood)