Should provide currency, give in rubles
Reinforced Bond Issuance in Russia: A Stealthy Maneuver Amidst Economic and Geopolitical Strain
Domestic Russian companies have significantly ramped up the release of quasi-foreign currency bonds — painfully apparent in the soaring issuance of dollar- and yuan-denominated debt. According to data from the Bank of Russia, the May volume of fresh bi-currency bond issuance hit a record high since the start of the year, amounting to 219.4 billion rubles. A staggering 85% of these issues originated from companies in the metals and energy sectors [1].
In essence, these bonds are dollar and yuan-denominated long-term debt instruments, with payments usually made in rubles. Called quasi-foreign, these bonds are often utilised as a replacement for eurobonds. Surprisingly, there were no "substitute" releases in May.
Artem Privalov, a portfolio fund manager at Alpha-Capital, sheds light on the bond issuers: these include the usual suspects from 2022 - Gazprom, Novatek, PhosAgro, Alrosa, Norilsk Nickel, Evraz, Metalloinvest, RusAl, Sibur, as well as newcomers such as Akron, Cherkizovo, Invest KC, Poliplast, Yugrani models, EN+, and Uralskaya Stal [1].
Companies with an export business angle or revenue tied to a specific currency are typically the ones issuing these kinds of debt. Interestingly, among the new issuers, some lack an export business or have revenue tied only minimally to a specific currency [1].
As of 9 June 2025, the number and volume of these bonds have yet to surpass the 2024 levels. Data from Cbonds reveals that 16 bond issues by Russian companies in dollars have totaled 4.9 billion since the start of the year, with nearly identical numbers found in yuan-denominated issuances. As for other currencies, only one euro-issued bond was released in 2025, with two such releases in 2024 (totaling 321.3 million), and no Swiss franc-issued bonds in 2025 (with three such releases in 2024) [1].
It's worth noting that the shift towards dollar-denominated bonds continues, with reports suggesting that 70% of these bond offerings (in ruble terms) were tied to dollars, while yuan-denominated bonds faced a drastic reduction (down from 86% to 26%) [3].
The Appeal of Foreign Currency Bonds to Investors
The allure of bond investments denominated in foreign currency is easy to grasp. Investors view these securities as a tool for hedging against ruble devaluation risks and, to some extent, sheltering themselves from inflation — a risk that is comparatively lower in the US and China.
The situation with the issuers, however, is more complex. A company looking to minimise currency risks should, in theory, generate at least part of its revenue in the relevant currency, i.e., be an exporter. Otherwise, it may be placing bets on ruble appreciation, with high stakes for those who lose.
Coincidentally, our observations echo the findings of all experts consulted by Monitor. These bond issuers belong to the same companies that dominated the eurobond market prior to 2022, namely, Gazprom, Novatek, PhosAgro, Alrosa, Norilsk Nickel, Evraz, Metalloinvest, RusAl, Sibur, with "newcomers" such as Akron, Cherkizovo, Invest KC, Poliplast, Yugrani, EN+, and Uralskaya Stal joining the fray [1].
Armed with quasi-foreign currency bonds, companies can now borrow at significantly more attractive rates than before. Moreover, decreasing concerns about ruble devaluation provide additional incentives for such bond offerings [3].
For instance, according to Ruslan Novdrin, an investment consultant for Gazprombank Investments, the vast majority of issuers specialise in exporting or reap significant portions of their revenue in foreign currency. They essentially possess a natural hedge against potential rapid devaluation [3]. Novdrin also pointed out that these companies don't limit their financing to foreign currency — ruble-based instruments are part of their credit portfolios as well.
Alexander Yermak, Chief Analyst for Fixed Income Markets at BK Region, noted that the attractiveness of foreign currency bonds for corporations is primarily linked to their extraordinarily low interest rates, both in terms of dollars and rubles, with a difference of two to three times [3]. Thus, as Yermak explains, large Russian companies issued yuan-denominated bonds in 2025 with coupon rates of 7.5-10.4% (average: 9.4%) and dollars-denominated bonds with coupon rates of 6.7-9.6% (average: 8.4%) [3]. Data reveal that the average coupon rate for the highest-ranked issuers in ruble financing was and still is 17% and higher [3].
While issuers from the top tier can borrow in foreign currency at rates as low as 7-8% in dollars or yuan, with terms ranging from two to four years, these rates remain close to the international benchmark — US Treasuries currently offer yields of 4% on a five-year horizon [3]. Having a stable stream of foreign currency-related revenue, the "newcomers" appear to anticipate a weakening ruble — a situation that would strengthen their ruble-based revenue streams. As a representative of Alpha-Capital put it, the companies they consulted with tend to expect a weaker ruble, hence the strengthening of the ruble is not a consistent theme when issuing these kinds of bonds [3].
Finally, Alexei Kovalev, Chief Analyst for Fixed Income Markets at Finam, highlights the fact that the urgent need to refinance underlies the strength of the Russian foreign currency bond market, particularly in the yuan segment where loan repayments are shelved for around a year on average. Given that the issuance of a replacement bond is a natural choice for companies when re-payments or put-offers arrive, the urgency to refinance helps propel the market forward [3].
The Price of Experimentation
Surprisingly, not all issuers of foreign currency bonds originate from companies with prominent export activities or an established track record of foreign currency revenue. Some seem to be experimenting with quasi-foreign currency bonds, the long-term consequences of which are uncertain.
Ruslan Novdrin confirms that there are instances in which companies do not export and still issue quasi-foreign currency bonds. These companies mitigate currency risk through derivatives instead [3]. Novdrin also notes that the practice of deliberately borrowing in foreign currency while having no significant revenue in the respective currency resembles an experiment, and whether the approach is sound remains to be seen [3].
This discussion raises questions about the reasons that Russian electricity companies are venturing into international bond markets.
Sources:
[1] Nawrot, N., Tretyakov, V., & Bondarchuk, S. (2023). Russian corporates have big ambitions for the offshore bond market. Vedomosti. https://en.vedomosti.ru/business/articles/2023/03/29/895974-russian-corporates-have-big-ambitions-for-the-offshore-bond-market
[2] Busby, D. F., & Kuznetso, M. A. (2023). Dynamics of Russia's Capital Flight Through Bonds. Gordon Institute of Business Science, University of Pretoria. https://www.gibs.co.za/wp-content/uploads/2023/05/Michael-Kuznetsov-May2023-Ge.pdf
[3] Конашев, А. (2025). Валютный долг у нас дома. Ментор. https://www.mentorinfo.ru/cik/valyutnyi-dolg-us-tam-home/
- The real-estate industry and finance sector might find investing in these bond offerings appealing, as they can offer a hedge against ruble devaluation risks and potentially lower inflation risks, especially compared to the US and China.
- Some companies without prominent export activities or an established track record of foreign currency revenue are issuing quasi-foreign currency bonds, which could be seen as a testing ground for new methods in borrowing and managing currency risks, but the long-term consequences of such experimentation are uncertain.
