Russia Plans First-Ever Sale Of Yuan Bonds

As Russia braces for further sanctions from Washington D.C. over their alleged role in "meddling" in the 2016 U.S. election, they are reportedly prepping a $1 billion yuan-denominated bond issuance in an effort to preemptively diversify financing risks away from the West.  According to Bloomberg, the sale will total 6 billion yuan and could come as early as next week.

Russia hired Bank of China Ltd., Gazprombank and Industrial & Commercial Bank of China Ltd. to arrange investor meetings for the sale of 6 billion yuan ($907 million) in five-year notes, according to people familiar with the plans. The issuance is slated for the end of this year or beginning of 2018, they said, speaking on condition of anonymity because the deal isn’t yet public.

 

The sale has been under discussion since U.S. and European sanctions in 2014 over the takeover of Crimea blocked many state-owned Russian companies’ access to Western capital markets. A report due next quarter from the U.S. Treasury on the potential consequences of extending penalties to include Russian sovereign debt has increased pressure on the Finance Ministry to seek out alternative means of borrowing.

 

“It would be wise of Russia to tap the yuan market now,” said Vladimir Miklashevsky, a senior economist at Danske Bank A/S in Helsinki. “China remains Russia’s biggest trade partner, China’s enormous financial system has lots of buying potential, too.”

While Bank of Russia Governor Elvira Nabiullina has said there will be “no serious consequences” from U.S. sanctions on new domestic government debt, economists in a Bloomberg survey estimated the move could add 50 basis points to 150 basis points to borrowing costs.

The Yuan-denominated bonds, known as dim-sum bonds, would be listed on the Moscow Exchange and available for investors to purchase via the Moscow branch of ICBC.

Of course, in addition to advancing Russian diversification interests, a successful sale of yuan-denominated Russian debt would also advance China's interests in the internationalization of the yuan. 

If Russia goes through with the sale, it would be the first sovereign issuance of a yuan-denominated bonds outside of China since 2016, according to Dealogic, with prior issuances in Hungary, Mongolia, the U.K. and the Canadian province of British Columbia.

Comments

JibjeResearch Thu, 11/30/2017 - 18:11 Permalink

Good bye petrodollars...I'm not sad/angry about this... even though I am an American.Everywhere I look at, there's money to be made..., just the quantity is different.

Implied Violins JibjeResearch Thu, 11/30/2017 - 18:43 Permalink

It's the same, ancient game run by the (((same families))). Out with the old, in with the new!

Same as it ever was. Since Babylon.

http://www.economicreason.com/usdollarcollapse/world-reserve-currencies…

America: Bad cop. Russia/China: Good cop.

Outcome: still in jail - but now we celebrate getting an increase in our chocolate ration, from 20 grams to 18!

In reply to by JibjeResearch

Jack's Raging … Thu, 11/30/2017 - 18:26 Permalink

Considering how openly the Chinese print and with how wild domestic inflation is in China, why would anyone buy this? Not worth anything unless you have some inside knowledge of very imminent yuan/physical gold convertibility. Despite rumors, that's just not going to happen--for mundanes at least.

TRM Jack's Raging … Thu, 11/30/2017 - 21:30 Permalink

China has cut deals with 150+ countries to cut out the middleman tax (US dollar). Basically they set them up for 3 years and guarantee inflation protection. So as long as you spend your money in 3 years (who doesn't buy stuff from China?) you are protected from inflation. US dollar reserve status utilization in international trade was 72% and now down to 66% and dropping. That is why they are so violently desperate to stop it and stomp on anyone who tries. Check out the charts from the IMF itselfhttps://www.imf.org/external/pubs/ft/fandd/2014/03/prasad.htm

In reply to by Jack's Raging …

king leon TRM Fri, 12/01/2017 - 05:56 Permalink

China is creating alternative markets, free from Wall street and City of London toxic ponzi schemes and US sanctions. There are plenty of punters willing to climb aboard. You only have to look at the investment and cooperation taking place between Russia and China, This marriage of convenience is a no brainer, Russia has an abundance of resources and China has an abundance of labour. When it all comes together, the US and the EU won't know what has hit them, they will rapidly become weak and powerless, other countries will see the light and peel away for the better option and leaving the US with the harsh reality that the parasite is close to death .     

In reply to by TRM

heddahenrik Thu, 11/30/2017 - 18:36 Permalink

Tip: Issue bonds in the currencies of failing empires! They will be cheap to repay. Tip 2: Issue bonds in gold that is the shiny yellow crap empires use to impress other empires. Tip 3: Don't issue bonds in any crypto currency. You know why.

Chupacabra-322 Thu, 11/30/2017 - 18:37 Permalink

Here's a good analysis revealing the real catalyst for Trump Armageddon:

"The true motive behind the wars in the Middle East is to maintain the US dollar as Reserve Currency and the Petrodollar as the unit of value for a barrel of oil. thus financing the US economy and its Military enforcement machine.

Russia and China have been dumping their US Treasury Bonds slowly and now trade between themselves in Gold, Yuan and rubles.

They have formed a new Financial system with the AIIB (Asian investment and Infrastructure Bank). They have formed a new Bank Clearing System, separate from SWIFT. They have their own credit card systems.

China is building the NEW SILK ROADS and sea arteries to connect the countries of ASIA to Europe. Trade along these routes will be in local currencies, bypassing the dollar.

The Silk Roads by-pass the US Navy’s control of the sea route choke points and make their carrier fleets largely redundant as enforcement tools..

For the Washington war machine, Syria is but a stop along the road to Iran, then up into Central Asia to cut and control the Silk Road and impose the US dollar toll charge.

The New Silk Roads spell the end of the US dollar as the dominant currency and the end of the US military and Financial hegemon.

Thus Syria is a major pivot point in World History and will be a war to the end. Empires die slowly and usually decay from within, but this may not be the case with the neocon psychopaths reluctant to concede power.

There are other US allies with interests in subduing Syria; Saudi and Qatar to build their gas pipeline to the Meditterean and onto the European Market, this undermines Russian near monopoly of supply and will undermine their already fragile economy.

Turkey with its grab for the corridor to the oilfields of Mosul and subjugation of its rebellious Kurds.

Israel and its Oded Yinon plan to break-up Syria and grab land, also to cut the Shia Crescent connecting Iran to Hezbollah in Lebanon.

European countries who are reliant on Russian gas energy supplies and wish to have another supply source from the Gulf States.

So there are many countries ready to feed on the carcass of Syria, if it is defeated."

MEFOBILLS Thu, 11/30/2017 - 18:51 Permalink

Russia only needs FX for buying the things it cannot produce domestically.  It also needs some FX for its central bank, which still operates under BIS rules.Russia can acquire Yuans by selling Oil to China.  Diversifying Russian economy means that Rubles don't have to leave the country, and also helps a middle class to form.  People can work making things, to then acquire Rubles.There is this idea that countries have to "borrow" on the international credit market.  This notion is hypnosis.  A sovereign country has its own credit, and should always use that first.  Russia has plenty of capable human capital, they have "earth" and they can make their own goods.  The ((harvard)) boys tried to reduce Russians to being hewers of wood and drawers of water in the 90's - that is, exporting Russian earth and minerals, for other nations to fashion into goods.The boyeezs scam was to get Russians into dollar denominated debt, and to discharge said dollar debt would require exporting oil, platinum, minerals, etc.  This then collapses Russian laboring middle class, and builds up a financial Oligarchy who has then claimed Russia's land and patrimony.  The Oligarchs then employ Russians to go around digging holes in the ground rather than making goods as prices.  Of course, usual ((suspects)) are always involved in these sort of sophisticated scams and the grabbing of resources for their ingroup.The more West tries to isolate Russia, the more Russian's are able to diversify their own economy.  Sanctions are a blessing in disguise for Russians.  

ReturnOfDaMac silverserfer Fri, 12/01/2017 - 13:20 Permalink

Actually lightens my heart to see so many on ZH that can see through the bullshit pumped out daily in the presstitute media.  It should be obvious that Russians are extremely rational actors and are definately NOT our enemy.  Did they try to influence us?  Hell yeah, just like we do to damn near every country on earth, every single day.  They just got a win this time, BFD, at least they are not malicious.

In reply to by silverserfer

uhland62 ReturnOfDaMac Thu, 11/30/2017 - 20:55 Permalink

You are overlooking the fact that the mega corporations had wanted to take over Russia. It kind of worked under Yeltsin but that created such bad conditions for people that Yeltsin threw in the towel. The process of American company takeovers was halted under Putin and the corporations have not forgiven or abandoned their goal of "Full Spectrum Dominance". It was just a private comment that I read elsewhere but is very indicative of the Western mindset: "Choke them until they surrender". As usual, a recipe for disaster, Washington is incapable of learning. 

In reply to by ReturnOfDaMac

uhland62 MEFOBILLS Thu, 11/30/2017 - 20:48 Permalink

What Russia cannot produce domestically, they can buy from their neighbour China. There's not much that China cannot supply and besides, China can buy something and then it goes on the train to Moscow. Why they bought the turbines from Siemens that went to Crimea is a little bizarre, but it was probably done to irritate the West - tit for tat. Diversity is the key, not too many eggs in one basket, applies to bonds as well. 

In reply to by MEFOBILLS

Brazen Heist Thu, 11/30/2017 - 19:39 Permalink

There is no legal basis for these sanctions. There was no proof that Russian meddling swung the election. They pulled this out of their ass because they can't compete against Russia without excuses to help them cheat and abuse their US dollar prerogative.Sore losers are running the US of A. This is going to end well.

LoveTruth Thu, 11/30/2017 - 20:54 Permalink

The dollar is the cryptocurency of the FED. Fundamentally Bitcoin and the Dollar are backed up by nothing. The dollar is forced on the Americans and can be issued without any limits. The Bitcoin is in a limitted supply. For as long as enough fools believe in them for so long they'll have value.  

Cockoo Fri, 12/01/2017 - 03:58 Permalink

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Russia purchased 38% of the worlds gold in 2017 and the BRICS block are in a gold rush meanwhile US is number one debtor nation. The BRICS nations establishing gold trading system for themselves while cutting the western nations petro-dollar.