Russian corporate Eurobonds: getting closer to a single payment scheme
smartmoney.oneWe expect Russia’s Finance Ministry to roll out a single scheme for foreign corporate Eurobond payments that would involve rouble settlements through the National Settlement Depositary (NSD). As soon as it is launched, the spread gap between offshore Russian Eurobonds via Euroclear and those via NSD will narrow significantly (most bonds at NSD are traded at par now).Thus, bonds at Euroclear which still trade at a significant discount look like an attractive investment target for buyers from Russia and “friendly” countries.We still assume that the risk of a cross default on Russia's external debt is low, given that the largest dedicated US and European funds sold most of their holdings at the early this year, so there wouldn’t be enough creditors left short to declare a default (required quorum or the threshold is usually holders of 25% of the outstanding bonds).What happened? On June 3, the EU adopted the sixth package of sanctions against Russia.The National Settlement Depository (NSD), among others, was designated for its essential role in the functioning of Russia’s financial system, thus directly and indirectly enabling the Russian Government in its activities.As we have pointed out before, the latest sanctions are not a game-changer.They only provide a legal pretext for blocking depository payments to Euroclear (already suspended since late February).