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Strategies & Market Trends : Investment in Russia and Eastern Europe -- Ignore unavailable to you. Want to Upgrade?

To: djane who wrote (364)	7/20/1998 3:40:00 PM
From: djane	Read Replies (1) \| Respond to of 1301

U.S. analysts bullish on Russian debt exchange Monday July 20, 2:50 pm Eastern Time By Hugh Bronstein NEW YORK, July 20 (Reuters) - Investors welcomed Russia's $6.4 billion debt exchange Monday, which U.S. analysts called large enough to help Moscow pay upcoming debt redemptions, but small enough to avoid oversupply in the Eurobond market. ''The market is going to continue to trade up because the uncertainty is over,'' said Martin Schubert, chairman of European Inter-American Finance Corp., an emerging markets debt trading and fund managing firm. Another uptick in Russian debt was expected later Monday should the International Monetary Fund (IMF) vote to release the first tranche in its $22.6 billion bailout loan to Russia. Russia on Monday issued $6.4 billion in long-term dollar-denominated bonds under a scheme to ease its short-term domestic debt burden. The plan to convert GKO treasury bills involved the issue of $2.97 billion worth of bonds due in 2005 and a similar amount of bonds due in 2018 at a clearing spread of 940 basis points over benchmark U.S. Treasuries. An additional $500 million of 2018 bonds was sold for cash, according to the Russian Finance Ministry. U.S. analysts hailed the exchange as a move that will allow Moscow to replenish its reserves with dollars needed to cover its sovereign debt obligations. ''They've covered their requirements for the next five to six weeks in the GKO market, by which time other money will be coming in,'' Schubert said. ''We are cautiously bullish on Russia.'' Matthew Sherwood, a Russian analyst with PlanEcon Inc., a Washington-based consulting firm, said the exchange deal was large enough to cause some short-term indigestion in the dollar-denominated Russian debt market. ''Now that there is this much dollar-denominated Russian debt out there, it will probably drive the price down on Russia's other Eurobonds,'' Sherwood said. Schubert disagreed. ''The supply was not excessive,'' he said. ''It was right on target with what was needed. We expect the outstanding bonds will trade tighter over the next few weeks.'' Robert Koenigsberger, managing director of Gramercy Advisors, which manages an emerging markets fund, said the market was relieved that the exchange was not larger. The market appears ready to absorb the new supply of paper, Koenigsberger said, leaving his firm ''very constructive on Russia at the moment.'' ''There was a lot of good news about Russia last week but the market did not rally, because it was anticipating an overhang of new supply,'' he said. ''Now the market knows the size and it can factor in the good news that has come over the last week.'' But there is a potential downside to the fact so many people were willing to participate in the exchange, said Jeffrey Woodruff, Russia analyst at BankBoston. ''A lot of people were apparently anxious to get out of rouble exposure, meaning they think in the future things might not be as rosy for Russia as they are today,'' Woodruff said. Russian Deputy Finance Minister Mikhail Kasyanov told Reuters Television that about 60 percent of the participants in the debt swap were non-Russian investors. He also said Russia would not return to the foreign bond market for at least a month. Related News Categories: currency, international, US Market News Help Copyright c 1998 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon See our Important Disclaimers and Legal Information. Questions or Comments?