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Russian Eurobonds First to Suffer
// Foreign investors began preparing for crisis
Instability at the risky mortgage loans market in the U.S. led to the fall of quotations of Russian Eurobonds. The spread of Russia-30 to US Treasuries reached on Monday the level of 138 basis points, which is the record of the last two years. Funds and investment banks lost interest to developing markets’ stock papers, and began preparing for a lengthy fall of stock markets, finding rescue in the ‘quiet harbor’ of U.S. high-reliable bonds. Experts say that investors usually behave this way when a large-scale crisis is approaching.
Due to the crisis at the U.S. mortgage bond market, investors turned their attention to state securities, primarily of the U.S., where they began to transfer funds from the assets in developing countries, including Russia.
Meanwhile, the quotations of highly-liquid Russian Eurobonds do not grow. Last Monday, these Eurobonds (to be repaid in 2028) were traded at the level of 109.5 percent of their nominal vale. This Monday, they remained within the range of 109.4-109.7 percent of their nominal value.
Consequently, the spread in profitability of Russian bonds and U.S. state securities grew from 100 to 138 basis points. The spread has now reached the record level since July 2005. Experts believe the Russian Eurobonds’ quotations will keep falling until the U.S. stock market becomes stable again.
www.kommersant.com
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