* Russia postpones Eurobond for at least three months
* Bureaucratic jostling a reason
* Analysts say optimal placement time may be now
(Adds detail, background, comments)
By Lidia Kelly
MOSCOW, Feb 1 A delay in placing a sovereign
Eurobond means that Russia risks failing to cash in on
favourable bond market conditions that have driven down yields
to historic lows.
Bureaucratic wrangling has held up Russia's borrowing plans,
postponing a dollar Eurobond placement for at least three
months, Deputy Finance Minister Sergei Storchak has told
Markets and investors had expected Moscow to soon raise as
much as $7 billion, or the whole of the 2013 borrowing plan, on
But jostling between the ministries in charge have put a
halt on the plans for now.
"We have not yet chosen them (lead managers). We are still
in the process of negotiations with the Economy Ministry,"
Storchak said in an interview.
"They (Economy Ministry) have not supported our approach on
the organisation of this process. When are we going to come to
an agreement - I don't know."
For many cash-strapped governments, such as several eurozone
countries, such a delay could be disastrous. But for Russia,
which runs a balanced budget thanks to high oil prices, the only
penalty could be just a higher yield paid to investors.
Russia's level of sovereign debt, at around 10 percent of
the gross domestic product, does not compare to that of Greece's
more than 160 percent, or Japan's 200 percent.
For now, markets have shrugged off the change of plans, as
analysts said there are plenty of other issues to choose from
and the delay will not impact Russia's healthy fiscal stance.
"I would have been worried if Russia's state finances were
in a precarious state, in a position like Ukraine and they
thought they couldn't get the bond away," said Werner Gey Van
Pittius, emerging market portfolio manager at Investec Asset
The longer Russia waits, however, the greater the chance
that it will have to pay a higher yield, as improving investor
sentiment globally leads to less demand for the safe-haven U.S.
bonds that provide a benchmark for Russia's Eurobonds.
"If there's a pick-up in the American economy, the yields on
U.S. Treasuries will be higher and higher going forward," said
Dmitry Dudkin, fixed income analyst at Uralsib in Moscow.
"Dramatically higher yields are highly unlikely, but
something in the area of 2.5 percent for 10-year Treasuries is
achievable. That will put additional pressure on Russian
Yields on Russia's benchmark Eurobond maturing in 2030, the
so-called Russia-30, hit a historic low of 2.5 percent last
month. On Friday, the bond traded at 3.09
percent, with a rise in yields in the last few days following a
general movement in the U.S. Treasuries.
"If you look at the longer horizon, the graph of Russia-30
for instance, yields below 3 percent, or 3 percent yields, were
never seen before," Dudkin said.
"So the quicker they launch (the issue) the better. It is a
pity (for them) that they are delaying it."
In March, Russia raised $7 billion in Eurobonds in the
largest emerging markets sovereign offering since at least 2000,
covering its foreign borrowing plan for the year and paving the
way for corporate issuance that had struggled after the
2008/2009 financial crisis.
According to Reuters calculations, Russian companies raised
more than $46 billion on foreign markets in 2012. This year,
there is no pressing need for another benchmark.
"We'll be checking market conditions," Storchak, in charge
of Russia's debt policy, told a press conference on Friday.
"There is no need to issue at any price."
But the finance ministry still wants to place the whole sum
in one go.
"We should approve the lead managers, then the lead managers
should take a pause to explain their views on tactics," Storchak
"Afterwards we will have to decide whether we hold a
roadshow or not... I'm afraid it all will not happen any time
(Additional reporting by Maya Dyakina and Jason Bush; Writing
by Lidia Kelly and Maya Dyakina)