As stated by the Bank of Russia in the «Financial review» for the first quarter of 2017, the growth of interest in financial instruments of Russian companies slowed down by caution and thorough risk analysis. The Central Bank has said that risks for the ruble gradually decrease, and at low lending activity loans to companies are replaced by bonds.
The Bank of Russia said that the credit risks on Russian financial instruments has significantly decreased, since the «confidence of the market participants in reducing inflation and interest rates in the long term, high», and less stable but short-term expectations. This is evidenced by the heterogeneous dynamics of interest rates on short-term and long-term loans , and that rates on long-term deposits declined faster than short term.
This, says the Central Bank, in the first quarter created a «reserve for price competition» banks in the future. CB explains the low credit activity of banks «caution» borrowers, and banks. As a result the demands of banks to the nonfinancial sector in the two quarter rose only 0.5 trillion, or 1% of their volume. The consequences of «caution» diverse — so investors during the reporting period avoid foreign exchange risks through the de-dollarization of deposits (decrease of foreign currency deposits to $ 45 million per month during the growth of the ruble on average of 218 billion rubles) and preferred short-term ruble deposits.
Rapid recovery of credit activity in the Russian Federation the Bank of Russia has been predicted, then as interest in corporate bonds is growing. This occurs even though foreign investors are almost absent on the Russian corporate bond market, where domestic investors have organized something like a local boom, and for the first quarter of 2017 reduced investments in the Russian stock market is about 50 billion rubles.
Indeed, agrees the managing Director of «BCS global markets,» Alexei Kupriyanov, now is a good time for issuers for the bond offering. The high demand for debt assets with a strong expectation of lower rates allow companies to raise funds more cheaply and for longer periods. Corporate bonds allow issuers to attract unsecured money without additional obligations to the banks for the covenants and balances/balance of account. Therefore, even if the same rate of the loan and the bonds, the public debt wins.
According to Kupriyanov, the market will remain strong. Rates will continue to decline, the issuers will get good placement due to good demand from investors and short-term potential price changes downward the investors will be used as opportunities for shopping. The key rate at the end of the year will be 8.5% per annum, which gives a good opportunity to reduce yields.
Corporate bonds are growing in demand explains, in turn, leading analyst GK TeleTrade mark Goikhman, because the current situation provides a number of advantages to both parties – the Issuer and the borrower. For large companies and banks producing the exchange bonds, this is an opportunity to raise funds percent lower than the key rate of the Central Bank. The profitability of «korporativki» on average from the beginning of 2017, was 9.15%. But for investors, these rates are quite attractive, as compared with the OFZ. And their yield decreases and an average of 7.86%. On the other hand, the corporate market is vast and dynamic-specific tools, market conditions, prospects of development as the stabilization of the economy.
Clearly, however, the analyst continues, that the yield here will be reduced. The reduction of inflation and key rate of the Central Bank will reduce borrowing costs from banking institutions. Accordingly, corporate issuers will become less profitable to maintain high interest rates on their loans in the market. The spread between OFZ and corporate securities will be reduced. But it will not be reduced to zero. One reason for this – the credit risks for the OFZ is much lower and fixed sovereign ratings. Risk premium for non – government bonds- unchanged condition of their higher yields. However, for most issuers the combination of yield and reliability are quite acceptable for investors, which will keep the high demand for their loans.
The prospects of the corporate bond market associated even with the increase of the maturity thereof, adds the mark in real. Business in Russia is sorely lacking is «long» money. While such a trend is not shown in full due to insufficient development of the market and the remaining high long-term risks. It is noteworthy that 86.9% of placements of corporate bonds in the primary market — day paper. And only as we continue to overcome the crisis, political instability will focus on increasing the proportion of strategic, long-term issues.