(Bloomberg) — BlackRock Inc., Capital Group Companies and Legal & General Group Plc are the top holders of Russia’s dollar bonds, which lost almost half their value this week, according to data compiled by Bloomberg.
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BlackRock, the world’s biggest asset manager, has about $1.5 billion of the $33 billion of bonds outstanding, according to the data. Capital Group and Legal & General are the second and third biggest investors, with holdings of $283 million and $272 million, respectively. The firms didn’t immediately comment on the data when contacted by email earlier today.
Russian dollar bonds were hammered this week on concern the invasion of Ukraine would incur sweeping sanctions that would severely limit Moscow’s ability to access financial markets, including restricting investors’ ability to trade Russian debt on the secondary market. They lost 45%, or $15 billion, of their market value, according a Bloomberg index that tracks 10 dollar bonds. The selloff on Thursday alone wiped out about $11 billion.
The security crisis is Europe’s worst since the end of World War II. And because Russia is Europe’s biggest gas supplier, providing more than a third of the region’s natural gas needs, energy prices jumped, prompting concern that inflation may accelerate further. That also fueled a flight from risk.
The average yield on the nation’s debt soared more than 10 percentage points in a single day to 17% on Thursday, the highest since Bloomberg’s index began at the end of 2011. That’s about 14 percentage points above where it started the year. And because of the plunge in market value, Russia’s weighting on Bloomberg’s Emerging Market Sovereign Index plummeted to 1.92% as of Feb. 24, down from 3.6% at the end of last year.
Russian stocks and the ruble also fell this week through Thursday, but they rebounded on Friday.
So far, even after sanctions on Russia were intensified, the market has determined that they aren’t tough enough to derail an economy that had been retreating gradually from the dollar assets in recent years. Also, the $643.2 billion in international reserves is a hefty cushion.
“Russia can more than easily pay its debt, and with many bondholders in Asia” and the Gulf Cooperation Council, said Marc Ostwald, a global strategist at ADM Investor Services. “It will probably not want to default out of spite.”
At 16%, Russia’s dollar reserves in 2021 were less than half the central bank’s stock pile four years earlier. And the dollar’s share of Russian export receipts declined to 56% in the first half of 2021 from 69% in 2016, while the euro’s doubled to 28%, according to a study by UBS Group AG economist Anna Zadornova.
As of 12:46 p.m. in London, the ruble was up, so were Russian stocks and the government’s dollar bonds due 2047.
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