| LONDON, July 28
LONDON, July 28 Russian bank and company bonds
denominated in dollars and euros have slumped in value in the
past few days in anticipation of tough European Union sanctions.
The EU has already slapped sanctions such as asset freezes
and travel bans on some Russian officials, after Russia annexed
Ukraine's Crimea region earlier this year and began supporting
separatists fighting Kiev's forces in eastern Ukraine.
The United States has also issued six rounds of sanctions,
with its toughest imposed on July 16.
But the downing on July 17 of a Malaysian airliner over
Ukraine, killing all 298 people on board, has led European
leaders to beef up their own measures.
EU policymakers will meet on Tuesday to discuss whether to
impose further sanctions, including the closure of capital
markets within the 28-country bloc to majority state-owned
Russian banks. The measures would not affect current supplies of
oil, gas and other commodities from Russia.
"The EU has been much more proactive than anyone expected a
few months back," said Manik Narain, an emerging FX strategist
at UBS. "In this environment, investors are pretty wary about
Gazprombank and Sberbank, both
majority-owned by the Russian government, issued
euro-denominated bonds only a few weeks ago, when investors were
far more optimistic about a resolution to the Ukraine crisis.
Gazprombank was added to the U.S. sanctions list earlier
this month. For a full list of U.S. sanctions, click here: 1.usa.gov/1tSqqVG
For a FACTBOX on maturing loans and bonds of Russia firms
facing sanctions, see )
The two banks' recent bonds
both fell two cents on the dollar on Monday, bringing losses
since launch to around eight cents on the dollar.
"Trading was destructive in nature," said one dealer.
But the bonds of Russian companies less likely to be
targeted by sanctions have also been hit, as investors scramble
to exit Russian assets broadly and liquidity dries up.
"What you would like to sell is not necessarily what you can
sell," said Zsolt Papp, head of emerging debt client portfolio
strategies at JPMorgan Asset Management.
"Liquidity issues have meant that some of the companies and
some of the sectors that may not be affected by any sanctions
are also suffering."
Russia's No. 2 oil producer Lukoil is one firm
highlighted by analysts at Barclays as particularly reliant on
For link to Barclays graphic link.reuters.com/jyj52w
Its dollar bond maturing Nov 2014 fell 0.4
cents on the dollar on Monday to its lowest in over four years
although it continues to trade above par.
Rosneft's 2022 dollar bond, meanwhile, fell
0.83 cents on Monday to about 85 cents on the dollar after The
Hague's arbitration court ruled Russia must pay a group of
shareholders in oil giant Yukos $51.6 billion for expropriating
its assets. Most of the now-defunct Yukos' assets were acquired
by Rosneft in auctions.
"Investors are not sure where the next shoe might drop,"
said David Spegel, head of emerging market debt strategy at
French bank BNP Paribas.
Investors were "combing through the companies looking for
which management structures are closely aligned to government
and will be most likely to see further sanctions", he added.
(Additional reporting by Spriha Srivastava and Pratima Desai;
Editing by Catherine Evans)