‘Unfriendly’ foreign investors selling Russia’s OFZ bonds at steep discount -sources


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MOSCOW — Foreign investors from countries Russia considers unfriendly are successfully offloading billions of roubles worth of local debt holdings, selling the government’s OFZ treasury bonds at a steep discount, two financial market sources told Reuters on Friday.

Moscow imposed restrictions on foreigners’ holdings in response to sweeping Western sanctions over its actions in Ukraine, leaving many non-resident investors unable to sell or receive interest payments on certain assets.

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As restrictions have gradually eased, offloading OFZ debt has become possible, but market players are being forced to sell far below the market price, the sources said.

“Non-residents have been selling their securities at 25-40% of face value,” one of the sources told Reuters. “We thought the main flow of such deals ended last year, but the outflow has continued at the beginning of this year.”

According to the second source, the discounts for Russian investors buying OFZs from non-residents were as high as 70%.

The sources said non-residents have reduced their investments in OFZs by 250 billion roubles ($3.61 billion) since the beginning of this year.

The share of foreign investors among holders of OFZ bonds had stood between 17.6% and 17.9% since February, but dropped to 13.2% as of Dec. 1, something the central bank put down to some bondholders transferring their securities from international accounting infrastructure to Russian accounting infrastructure.

Securities worth 1.36 trillion roubles were “localized’ using this method, the central bank said, with 94.4% being OFZs.

The National Settlement Depository (NSD) declined to say by how much foreigners’ holdings had decreased in January. The central bank did not respond to a Reuters request for comment on this story. ($1 = 69.3320 roubles) (Reporting by Elena Fabrichnaya; Writing by Alexander Marrow Editing by Gareth Jones)


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