Why Foreigners Love Vladimir Putin’s Bond Market
Russian elections highlight the strange economic attraction investors have shown for the country’s financial markets
Nonresidents now hold one-third of domestic government bonds, compared with barely any six years ago.
.. And Russian bonds still look attractive, with a 10-year yield of just under 7%, while inflation has fallen well below the central bank’s 4% target. Conservative economic policy was part of the reason for Standard & Poor’s to upgrade Russia to investment-grade status in February.
But Russia needs change too. And here, continuity in leadership is part of the problem. The economy has emerged from recession and grew 1.5% in 2017, but much faster growth may be tricky: The central bank itself says structural reform is needed to boost growth beyond 1.5% to 2%. Russia’s population is shrinking and aging. Productivity is poor and state involvement in the economy is high.