UPDATE 4-Russia opens Eurobond book, pays price for waiting
(Adds final issue volume, final pricing)
MOSCOW, Sept 9 (Reuters) - Russia placed $6 billion of dollar-denominated and 725 million euros ($960 million) of euro-denominated Eurobonds on Monday, after postponing the placement several times this year.
The Finance Ministry issued a three-tranche dollar-denominated Eurobond and a one-tranche euro-denominated Eurobond, one of the issue's organisers and another source close to the placement told Reuters.
The placement fulfils the ministry's $7 billion borrowing plan for the year but analysts say Russia may in the end pay a price for waiting because fears of the withdrawal of unprecedented U.S. monetary stimulus have made borrowing more expensive.
The government has often said it does not need the funds because it expects a fiscal deficit of only 0.8 percent of gross domestic product this year, but it has no other ready sources of revenue and the economy is slowing.
"Of course it isn't the sweet spot," said Denis Poryvai, fixed income analyst at Raiffeisenbank in Moscow, who estimated that the middle of the yield range on the new Eurobonds implied a premium of around 10 basis points to where Russia's sovereign bonds are trading.
The 5-year dollar Eurobond was placed at U.S. Treasuries plus 195 basis points, and the 10-year and 30-year tranches both at Treasuries plus 220 basis points, slightly lower than initial guidance issued earlier on Monday.
The U.S. 10-year Treasury benchmark now trades at 2.9 percent. In May, before Chairman Ben Bernanke warned that the U.S. Federal Reserve may start to taper its bond-buying programme, it was trading as low as 1.7 percent.
The ministry sold the seven-year euro tranche at mid-swaps plus 185 basis points.
Plans to issue the euro-denominated bond in seven- and 12-year tranches were scrapped in favour of a single seven-year tranche due to strong demand for the other tranches, the sources said, with demand skewed towards the dollar-denominated tranches.
YIELDS BACK UP
A near-doubling in yields on benchmark 10-year U.S. Treasury bonds since May to nearly 3 percent has had knock-on effects for sovereign borrowers around the world.
The yield on Russia's 2030 Eurobond, one of the more liquid sovereign issues, has risen to 4.52 percent from a low of 2.74 percent in May.
Raiffeisen's Poryvai said the Finance Ministry had been left with little alternative to tapping the international market, as its plans for raising cash on the domestic bond market have fallen far short of target.
So far this year Russia has raised a total of around 120 billion roubles ($3.6 billion) on the domestic market, net of redemptions, compared with its target of 500-600 billion roubles. Meanwhile the rouble's value has slid along with other emerging currencies.
However, Barclays Russia economist Vladimir Panytushin said the timing of Russia's Eurobond issue was "not bad".
He said the relatively small budget gap could be covered. "But why not take advantage of the fact that the markets have more or less stabilised?" he said, noting a revival of issuance in Europe.
Barclays, Deutsche Bank, Gazprombank, The Royal Bank of Scotland, Renaissance, Capital and VTB Capital have been mandated as joint lead managers, the source close to the placement said. ($1 = 33.3140 Russian roubles) ($1 = 0.7546 euros) (Reporting by Oksana Kobzeva and Maya Dyakina, Writing by Lidia Kelly and Jason Bush, Editing by Douglas Busvine and Ruth Pitchford)
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