April 9, 2018 / 10:08 AM / 3 months ago

EMERGING MARKETS-Russian rouble, dollar bonds lead losses after new U.S. sanctions

    By Claire Milhench
    LONDON, April 9 (Reuters) - The Russian rouble tumbled
almost 2 percent and dollar bonds issued by RUSAL Capital led
losses in Russian debt markets on Monday after fresh sanctions
imposed by the United States raised fears of a technical default
by the company.
    On Friday the U.S. imposed major sanctions against several
Russian businessmen and their companies, striking at allies of
President Vladimir Putin over Moscow's alleged meddling in the
2016 U.S. election and other "malign activity".             
    The action caused a hefty sell-off across Russian markets,
with the rouble slumping against the dollar        to
mid-December lows and shares          down more than 8 percent
to their lowest this year.
    "The market reaction reflects rising concerns that foreign
investors may find it difficult to invest in Russian assets
given the U.S. has imposed this new wave of sanctions against
various Russian companies," said Piotr Matys, a strategist at
Rabobank.
    "The main objective of these sanctions is to curb access to
global markets for the affected Russian companies," he added.  
    The RUSAL Capital bond maturing 2022 fell more than 11 cents
at one point to a record low while the 2023 bond fell more than
14 cents to 73.6 cents, also a record low                  .
    Rusal shares           fell almost 29 percent on the Moscow
exchange with the company assessing the sanctions may result in
technical defaults.                 
    The bonds of Russian gold producer Polyus also sold off,
             while Russian sovereign bonds tumbled across the
curve, with the 2043 dollar-denominated eurobond down over 3
cents, according to Tradeweb.              
    The average yield spread of Russian sovereign bonds over
U.S. Treasuries on the JPMorgan EMBI Global Diversified widened
by 14 basis points to 199 bps. 
    Russian five-year credit default swaps rose 6 bps from
Friday's close to 127 bps, according to IHS Markit data, the
highest since mid-December.                  
    Away from Russia, sentiment for emerging markets remained
positive, with MSCI's benchmark emerging stocks index          
up 0.2 percent. 
    Outperformers included Budapest stocks       , which leapt
1.8 percent after Prime Minister Viktor Orban's government was
re-elected with a strong mandate in Sunday's election, averting
the risk of unpredictable policy changes.             
    The Hungarian forint also firmed 0.14 percent against the
euro           and the yield on Hungary's 10-year government
bonds             dropped 6 basis points to 2.45 percent.
    "This positive reaction comes from the fact that investors
are generally in favour of political stability," said Matys.
    The Turkish lira        continued to slide, weakening 0.5
percent to another record low. 
    At the weekend Turkey criticised the United States for
sending what it said were mixed messages over Syria, saying
Washington was sowing confusion about its future role in the
country. On Monday the Pentagon denied attacking a Syrian air
base.                           
    
     Emerging Markets Prices from Reuters            
 Equities                  Latest    Net Chg  % Chg  % Chg      
     
                                                     on year    
       
 Morgan Stanley               
 Emrg Mkt Indx             1163.41    +1.44   +0.12   +0.43     
       
 Czech Rep                 1131.43    +2.61   +0.23   +4.94     
       
 Poland                    2282.80   +24.00   +1.06   -7.25     
       
 Hungary                  38598.44  +636.18   +1.68   -1.98     
       
 Romania                   8861.11  +104.93   +1.20  +14.28     
       
 Greece                     801.14   +20.00   +2.56   -0.15     
       
 Russia                    1105.12  -131.36  -10.62   -4.27     
       
 South Africa             49386.68  +246.09   +0.50   -5.99     
       
 Turkey                   14632.45  -105.09   -0.09   -0.61     
       
 China                     3139.33    +8.22   +0.26   -5.08     
       
 India                    33833.41  +206.44   +0.61   -0.66     
       
            
 Currencies              Latest    Prev    Local    Local       
      
                                   close   currency currency    
       
                                           % change % change    
       
                                                    in 2018     
      
 Czech Rep                25.36     25.36   +0.03    +0.68      
     
 Poland                    4.19      4.20   +0.08    -0.44      
     
 Hungary                 311.84    312.25   +0.13    -0.42      
     
 Romania                   4.66      4.66   -0.02    +0.36      
     
 Serbia                  118.07    118.05   -0.02    +0.28      
     
 Russia                   59.22     58.14   -1.83    -2.64      
     
 Kazakhstan              321.36    319.48   -0.59    +3.56      
     
 Ukraine                  25.99     25.99   -0.00    +8.29      
     
 South Africa             12.08     12.02   -0.49    +2.31      
     
 Kenya                   101.00    100.90   -0.10    +2.08      
     
 Israel                    3.53      3.53   +0.18    -1.41      
     
 Turkey                    4.06      4.04   -0.52    -6.77      
     
 China                     6.31      6.30   -0.14    +3.05      
     
 India                    65.00     64.92   -0.12    -1.80      
     
 Brazil                    3.37      3.37   +0.01    -1.67      
     
 Mexico                   18.33     18.28   -0.25    +7.22      
     
            
 Debt                 Index   Strip Spd  Chg   %Rtn   Index     
       
 Sov'gn Debt          EMBIG   317        -1    .10  7 95.55 1   
        
            

 (Reporting by Claire Milhench and Sujata Rao
Editing by Robin Pomeroy)
  
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