Russia sees market appetite for rouble Eurobond

Mon Jan 31, 2011 5:43am EST

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DAVOS, Switzerland, Jan 31 - Russia sees evidence of demand from investors for its planned debut rouble bond and may issue the paper, potentially worth up to $3 billion, next month, Deputy Finance Minister Dmitry Pankin told Reuters Insider television.

"This year we could see again some appetite from investors for emerging market instruments, and now we could say that it's favorable conditions," Pankin said in an interview conducted late on Friday on the sidelines of the World Economic Forum in Davos.

Sources told Reuters earlier on Friday that Russia is looking at carrying out the placement in February after it was delayed from the end of last year due to the weakening of debt markets on the back of Europe's debt crisis.

"I cannot say (if it will be) in February or March, but it's on our agenda and we think that it will be an interesting instrument," Pankin said.

He reiterated that the bond would likely be worth $1-3 billion, based on investment banks' recommendations.

Russia, which needs the cash to plug a post-recession budget deficit, would follow five recent Russian corporate Eurobond issues worth a total of almost $4 billion since the start of the year.

"Our plan is not to spend the Reserve Fund and the National Welfare Fund, so (the) strategy is that we will keep this money untouched and we will use borrowing to cover our budget deficit ... and the major source of borrowing will be (on the) internal market, in roubles," Pankin said.

He added that the deficit could come in at below the government's plan of 3.6 percent of GDP this year.

Russia returned to international debt markets in 2010 after more than a decade's absence. It plans to borrow up to 1.74 trillion in roubles ($58.43 billion) this year, including Eurobonds, plus up to $7 billion in foreign currencies.

Pankin also said that Russia could in theory be interested in investing in bonds issued by the European Financial Stability Facility, echoing earlier comments by his boss, Alexei Kudrin.

The central bank, which manages the country's near-$500 billion reserves, currently does not have the right to buy the EFSF bonds, meaning that if Russia decides to invest, it would need to first change legislation.

(Writing by Toni Vorobyova; editing by Patrick Graham)

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