Russia Reopens Bond Market Trading For First Time Since War Began

Russia's central bank reopened bond trading on the Moscow exchange yesterday for the first time since the country invaded Ukraine. The price of Russia's ruble-dominated government debt is witnessing a downward trajectory and the borrowing costs are going up.

The Russian central bank bought bonds to support prices. To stabilise markets and mitigate the fallout from western sanctions, the central bank has imposed several restrictions on financial transactions.

Many rating agencies have downgraded Russia's bonds to "junk" status.

Meanwhile, earlier this month, Russia missed another interest payment to foreign investors. As of now there is a 30-day grace period after which the government may be declared being in default.

The Russian government sent this payment on ruble debt to a government depository account instead of sending in to bondholders.

The government relies on domestic Russian banks for most of its borrowing needs. According to the Tass news agency, the RGBI index of government debt fell 9.4 per cent. This has resulted in pushing yields on bonds with 1-2 years of maturities to 19.5 per cent and with maturities of 10 years to 18.1 per cent.

In a statement released on its website, the central bank said that the bonds it purchased would be disposed of later to ensure it doesn't influence the central bank's monetary policy.

Stock trading still remains closed and there has been no word on when it might reopen. Last time stocks traded was February 25. It was the day after the invasion began and the main stock index went down. The central bank has said that announcements about trading would be made later.

Stocks last traded on Feb. 25, the day after the invasion started and sent the main stock index sharply lower. The central bank said announcements about trading in other sections of the exchange than bonds would be made at a later time.