RPT – US sanctions on Russian bonds are more symbolic than anything – Asset Manager
NEW YORK (UrduPoint News / Sputnik – April 22, 2021) Sanctions prohibiting U.S. banks and institutional investors from purchasing new ruble-denominated bonds at Russian government auctions are symbolic at best, although they may be a missed opportunity for Americans to invest in such debt, Steven Keller, chief investment officer of Wexler Capital, told Sputnik.
The White House banned U.S. entities from purchasing the ruble-based bonds on April 15 as part of a series of sanctions targeting Russia for its alleged cyber attacks and other hostile acts against U.S. interests.
Russian intelligence was behind the massive SolarWinds hack into US computer systems last year, according to accusations by the Biden administration. Russia has also been accused of interfering in the 2020 US election and waging chemical warfare. Moscow has denied the allegations and said it would respond to US sanctions in kind.
Keller, referring specifically to the bond sanctions, described the Biden administration’s action as “more political tribulation from the United States, which is unlikely to cost the Kremlin much sleep.”
Keller said the Biden administration’s ban on bonds “won’t ripple” with American investors either since few people are involved in such debt.
“If anything, it will somewhat limit the number of international bond offerings that will be open to US banks and institutional investors,” he said. “In a dynamic and free market, you want to encourage, not limit, investor options, especially when it comes to sovereign bonds.”
While the Biden administration sanctioned ruble-based bonds issued by the Russian government at auction, it left the secondary market open for this debt, with U.S. investors still able to buy these bonds from those who resell them on the market. free.
“In a sense, that means you have the sanctions on ruble-denominated bonds and at the same time you don’t have them,” Keller said. “Rather than reading this as a move to deliberately confuse the market, I think the Biden administration is taking a wait-and-see approach to how the Kremlin responds to these sanctions, before proceeding with a possible next wave of sanctions.”
On Moscow’s side, its dollar-denominated bonds were also hit after the White House action, but rebounded shortly after the limited scope of Russian debt sanctions became clear.
According to data from S&P Global Ratings, Russia had low net debt relative to its gross domestic product, and analysts welcomed the government’s commitment to prudent fiscal policy.
U.S. media noted that the country’s investment banks were positive for Russia coming in 2021, largely due to steps its government has taken to defend itself against financial pressure from the United States and Europe. .
Bank of America had ranked Russia as the best of the large emerging countries in a December report, citing its “large positive net foreign assets, lowest public debt, low budget deficit and even a current account surplus – despite low oil prices. “
Russia was also the 18th largest component of a widely followed BlackRock Inc. exchange-traded fund invested in emerging market local currency bonds.
Prior to the ban by the Biden administration, the previous Trump administration in 2018 banned US financial institutions from contracting bonds from certain companies and individuals with connections to the Kremlin in retaliation for allegations of electoral interference and hacking. The following year, the ban was extended to purchases of new Russian government bonds issued in foreign currencies, such as the dollar or the euro.
Keller said the Biden administration’s next move may be to go all the way to target ruble-denominated bonds in the secondary market.
“But the repercussions from Russia could be much bigger if we did,” Keller said. “I think the White House has shown its hand so far and there may not be a follow-up for a while.”
The US Treasury said this week that it was conducting a review of various US sanctions policies to get better results for the nation.
The review aims to ensure that the implementation and enforcement of sanctions are “relevant, rigorous and purposeful, for the purpose of advancing the national security, foreign policy and economic objectives of the United States”, Assistant Secretary of the Treasury Wally Adeyemo said in the United States. bank executives Tuesday.