Russian Corporate Bonds Open Up to Overseas Investors

Terry Flanagan

Clearstream and Euroclear Bank have both started offering services for Russian corporate bonds in the latest stage of the government’s plan to develop Moscow as an international financial centre.

Clearstream, the international central securities depository owned by German exchange operator Deutsche Börse, said in a statement it was opening up settlement for Russian corporate bonds on January 30 through its direct link to the National Settlement Depository, the Russian central securities depository.

Irene Mermigidis, head of network management at Clearstream, told Markets Media that Clearstream has had an account with NSD since February 2013. In May 2013 Clearstream helped develop a delivery-versus-payment settlement system via its NSD link.

“In June last year we started to offer regional and municipal bonds (having offered OFZ Russian bonds via our NSD link since February 2013), so from a technical point of view it was easy to add corporate bonds,” added Mermigidis. “However legal issues and operational matters such as tax disclosures still had to be resolved, to enable us to add corporate bonds to our offering.”

Since the settlement infrastructure for OFZ government bonds was opened up for overseas investors, the share of foreign investment has increased up by about 25%, according to the Bank of Russia.

Sergey Shvetsov, first deputy governor of the Bank of Russia, head of the Bank of Russia financial markets service, said in a statement: “Entry of international clearing and settlement organisations to the OFZ market has already provided a positive impact by decreasing the cost of borrowings for the government.”

In July this year Clearstream is also aiming to launch settlement for equities via its direct link to NSD, subject to changes in Russian legislation. Clearstream currently settles equities in Russia using its indirect link to the NSD and local agent bank, Deutsche Bank Moscow.

Eddie Astanin, chairman of the executive board of NSD, said in a statement: “There is still a long way to go. We have to improve accessibility of corporate actions information, develop new products like collateral management and serve investors from around the world in line with best practice. We believe that today’s launch is another big step in establishing Moscow as one of the global financial centres.”

Mermigidis said the extension of Clearstream services in Russia could lead to more offerings in the Commonwealth of Independent States.

“The NSD has MOUs in place with various CIS countries,” she said. “We are closely working with the NSD and we would look at the prospective opportunities on a case-by-case basis.”

Brussels-based Euroclear Bank said in a statement it is launching post-trade services for Russian corporate and municipal bonds on 30 January through its account with NSD, complementing its offering for Russian government bonds which launched in February last year.

Frederic Hannequart, chairman of Euroclear Bank, said in the statement: “The growing appetite shown by investors to mitigate risks while ensuring a solid return on their diverse portfolio of assets is now further enhanced with access to many of Russia’s companies. Furthermore, foreign firms can also be important stakeholders in the development of key municipal infrastructure programmes.”

Russian government, corporate and municipal securities held in safekeeping by Euroclear Bank will also be eligible as securities collateral for securitised transactions where Euroclear Bank is the triparty collateral management agent.

Related articles

  1. Trading Europe From ‘Across the Pond’

    The new futures will help customers manage sovereign debt risk in Europe.

  2. European ETFs Continue Record Growth

    Euro-denominated cryptocurrencies are the second highest traded fiat behind the U.S. dollar.

  3. Trading Europe From ‘Across the Pond’

    ISDA warns on proposed changes to post-trade deferrals regime.

  4. Tradeweb Draws Buy Side in Europe

    Net sales registered net outflows of €3bn, compared to €42bn in March 2022.

  5. European financial markets would benefit from a well-functioning fixed income consolidated tape.