Russia: A touch too bullish on the bear?
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Russia: A touch too bullish on the bear?

Bankers are selling hard the story of Russia’s return to the Eurobond market with City of Moscow’s latest foray. Yet investors need to be cautious given the republic’s recent debt history. The queue of credible issuers is far from endless and likely to be trimmed by the Russian government as it prepares for its own refinancing in 2002.

Author: Chris Cockerill

Russia is booming. And Russian issuers, we are told, are once again queuing up to tap the Eurobond market. The news has prompted enthusiasm from overnight experts on Russia. As one such banker puts it: "It's been a place of 900 years of serfdom, 70 years of communism, and then was subjugated by 10 years of corruption when nobody knew what the hell was going on. But I'm bullish now, very bullish about the country."

More such incautious optimism is to be expected, but it's to be hoped that investors will be wary and not forget that it's just three years since the sovereign defaulted on its domestic debt, the currency collapsed, foreign investors lost their shirts, a global financial crisis blew up and Russia's credibility with fixed-income investors was destroyed.

From pariah to performer

Two years ago, enthusiasm for Russian credit was non-existent. But times have changed, and three years after becoming pariahs in the international capital markets, the Russians are back. Debt capital markets teams are delighted. And as one banker eloquently puts it, dripping coffee down his shirt: "There's a shitload in the pipeline."

Russia, say bankers, is the story to buy.

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