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Update: Russia prices $4 billion of eurobonds (Books last heard to be around $7.2 billion):

  • *RUSSIA PRICES $2.5B OF 2047 EUROBONDS AT 5.25%
  • *RUSSIA PRICES $1.5B OF 11-YR EUROBONDS AT 4.625%

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Internal demand for Russian debt has remained notably robust since the Western world began to demonize Putin and layer on sanctions.

And now, as Bloomberg reports, a recent ratings upgrade out of junk by S&P Global means that Russia is now included in investment-grade indexes, increasing the pool of investors who will automatically hold a portion of the new bond when it is sold.

And it appears the deepening diplomatic spat with the West and a fresh round of penalties aren’t enough to put investors off, as Bloomberg reports that eurobonds being sold by Russia today as bids near $6.7 billion.

Notably, in a break from convention, local investors are being given priority in the sale in a Kremlin move to encourage wealthy Russians to repatriate capital.

While some international investors said they were put off by the geopolitical fractures... James Barrineau, the New York-based co-head of emerging-market debt at Schroders Plc. said he was skipping the sale because the bonds don’t offer much value and sanctions risk is still high.

“We don’t find a lot of value here,” Barrineau said.

“Russian dollar debt has fully priced in improving fundamentals and remains at risk of more sanctions noise.”

Others said said they were interested in buying the new debt.

“The sovereign isn’t sanctioned, so investors have to take the new issue very seriously,” said Richard Segal, a senior analyst in London with Manulife Asset Management, a $400 billion money manager.

“Some may pass due to the geopolitical situation and therefore the yield may be higher than it would have been otherwise.”

But, despite endless exhortations about the state of the Russian economy, Russian credit risk has collapsed to its lowest since August 2008...

For now it looks like 'economic war' is not working...