Trading in Russian bonds resumes, but yields fly higher

Yields on Russian bonds soared today after authorities un-froze trading in government debt for the first time since the day after the Kremlin invaded Ukraine.

Investors dumped OFZ Treasury bonds – the acronym for Russian government loan obligations – on fears Moscow will be unable or unwilling to pay its debts due to Western sanctions.

Returns on some Russian bonds, which move in the opposite direction to prices, topped 40 per cent in a sign markets view the assets as extremely risky.

Holders of bonds tend to have to offer a higher return to find buyers if sentiment toward the asset is negative.

The Moscow Exchange said non-Russian residents will be unable to sell their OFZ holdings until 1 April, meaning most of the selloff was driven by Russian residents.

It came on the same day as Moscow airport furloughed around 7,000 workers.

Trading in Russian stocks has been mothballed since 25 February as authorities seek to avoid a sudden drop in share prices caused by investors ditching Russian equities to limit exposure to the economic fallout from President Putin invading Ukraine.

Scepticism about Russia’s ability to meet coupon payments have swept throughout markets after the Kremlin signalled it would pay a recent interest liability in roubles instead of dollars.

Russia had a $117m interest payment due last week and it would have slipped into default if it had not paid investors after a 30-day grace period.

Holders of the debt confirmed they had received payment.

Russia has a $2bn interest payment due on 4 April.