(Adds further quotes)<\/p>\n
LONDON, April 15 (Reuters) – President Joe Biden will issue an executive order on Thursday authorizing the U.S. government to sanction any sector of the Russian economy and barring U.S. banks from participating in the primary markets for rouble-denominated bonds.<\/p>\n
It does not however prevent them from buying the debt in secondary markets, Reuters reported.<\/p>\n
Here is a selection of quotes on the subject:<\/p>\n
\u201cI don\u2019t think there are direct lines that can be drawn to connect the dots between the Russia sanctions and the activity in the Treasury market today. The sanctions have been anticipated and I don\u2019t think what came out was necessarily surprising to the market. The question can be asked if there is a link that I am not seeing, given that the Treasury market is strong this morning in the face of better than expected data on initial jobless claims and retail sales… is there a bit of a safe haven bid because of Russia that is blunting a market reaction to the strong U.S. data?\u201d<\/p>\n
\u201cNot much at this point. Looks like we may be getting a flight-to-quality, safety rally (in U.S. Treasuries) on the news.\u201d<\/p>\n
\u201cWe estimate that these sanctions on the primary OFZ market will lead to the (central bank) policy rate being 50 bps higher than it would otherwise have been.<\/p>\n
\u201cThe sanctions are calibrated to be serious but not too serious. It\u2019s serious because it\u2019s not just another round of political sanctions targeting a few officials or blacklisting companies no one has ever heard of.<\/p>\n
\u201cThey have gone for real financial sanctions designed to harm Russia by raising its borrowing costs and weakening the rouble.<\/p>\n
\u201cBut if you just sanction primary issuance, international investors will continue buying in secondary markets.\u201d<\/p>\n
\u201cRestrictions on purchases of new sovereign debt is hardly a potent punishment for an economy running less than a 1% fiscal deficit and with under 20% debt to GDP.<\/p>\n
\u201cAt best, it is a signal that the U.S. can escalate its financial measures against Russia, but there is little here to shake the investment case in non-sanctioned Russia.\u201d<\/p>\n
\u201cIf non-residents can\u2019t buy new Russian rouble debt, then those will not be included in international indexes so the paper will trade at a discount. This will increase the cost of the finance ministry\u2019s borrowing.\u201d<\/p>\n
\u201cAs expected. So there\u2019s not much of a market reaction but the U.S. rhetoric keeps alive the risk of sanctions on secondary markets. It now depends on (President Vladimir) Putin\u2019s response — will he cancel the U.S.-Russia summit? If so, the risk premium will remain.\u201d<\/p>\n
\u201cMy take on this is that the impact of these new sanctions will have limited impact on the Russia. Local rates could widen a bit, as foreign investors would be barred from participating in OFZ auctions, but ultimately demand for OFZ would likely to find its way via the secondary market.<\/p>\n
\u201cThe external backdrop is quite favourable for Russia, starting with relatively high oil prices and decent growth prospects this year, while international reserves remain very high. In a nutshell, the downside and the damage for Russia is likely to be limited.\u201d<\/p>\n
\u201cSo U.S. institutions cannot buy Russian sovereign debt in primary issuance but can get their Russian bank friends to buy it for them in primary, give them a fee, and then buy it in the secondary.<\/p>\n
\u201cGuys, come on, you need to do better than this.<\/p>\n
\u201cThe language should have stated that participation in primary market and subsequent ownership in these deals was prohibited.\u201d<\/p>\n
\u201cTo the extent that the rouble comes under significant pressure and the central bank becomes more concerned about the outlook for inflation, we think it would argue in favour of more aggressive monetary tightening. This is not our baseline forecast but wee expect a 50bp interest rate hike next week to 5.00%.\u201d<\/p>\n
DMITRY DOLGIN, ING BANK, MOSCOW \u201cThe positive is that non-residents can still participate in the secondary OFZ market and don\u2019t need to get rid of securities they have already purchased. But the negative is no one can guarantee that this will be the case. U.S. investors could see the current package of sanctions as a window of opportunity to get out of Russia.<\/p>\n
I don\u2019t see interest rates being raised just because of these sanctions. It will make sense only if the rouble weakens sharply.\u201d<\/p>\n
\u201cThe situation is escalating… economic sanctions are a pretty easy call if there is not going to be military action.\u201d<\/p>\n