Azerbaijan, Baku, Feb.8 / Trend /
Standard & Poor's Ratings Services said that the opening of the Russian domestic government bond market to foreign investors has no impact on the ratings on the Russian Federation (foreign currency BBB/Stable/A-2; local currency BBB+/Stable/A-2), S&P said in its report on Friday.
Euroclear started servicing ruble-denominated federal government bonds (OFZ) on Feb. 7, 2013, thereby opening the domestic government bond market to foreign investors, which was previously de facto closed to them. At the end of 2012, more than three-quarters of the central government's Russian ruble (RUB) 5.3 trillion (8.5% of GDP) of debt was in rubles, with the remainder in U.S. dollars.
Russia's domestic bond market is comparatively shallow. The largest amount of gross long-term borrowing (in all currencies) by the Russian government was RUB1.4 trillion (2.5% of GDP) in 2011. Opening this market to foreign investors should expand the government's funding options and the depth of the domestic market.
It would also increase the government's ability to fund potential government deficits at a time when deficits could become a more persistent feature of Russia's public finances, or under a scenario in which a sudden drop in oil prices led to a fall in government revenues (for further details see related research). On the other hand, an open market could also expose the market to more speculative flows of funds and to stronger cyclicality, particularly in situations of economic stress.
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