Morning Commentary: Russian bonds widen ahead of further sanctions; Rosneft takes a hit

By Christine Van Dusen

Atlanta, July 29 – Bonds from Russia continued to widen on Tuesday as the United States accused the sovereign of sending more troops to the border with Ukraine and the likelihood of further sanctions increased.

Russian bank bonds widened between 15 basis points and 25 bps during the morning session as the companies awaited further punishment from the European Union and United States, a London-based analyst said.

In other news from Russia, oil company OAO Rosneft – which owns most of the assets of Yukos Oil Co. – saw its bonds take a hit after Russia was ordered to pay Yukos’ former owners $50 billion.

“The settlement has to be paid before January 2015 or else it will start earning interest,” the analyst said. “With Russia set to appeal, it will likely be some time before we have any sort of conclusion on this case. The concern, however, is that assets of both Russia and Rosneft in the West could be frozen.”

Rosneft officials say the company is not subject to the claims, he said.

“Clearly, the impact on Rosneft could be substantial,” he said.

In response to the news, the company’s bonds have widened about 30 bps.

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