Russian corporate bonds have jumped as vultures spy bargains despite the war in Ukraine
- The prices of some Russian corporate bonds have risen sharply over the last two weeks.
- Analysts said some investors have scented a bargain, and have also been encouraged by peace talks.
The prices of a handful of Russian corporate bonds have jumped over the last two weeks as investors have scented bargains despite the ongoing war in Ukraine.
Bonds from energy company Lukoil have gained notably, with investors seemingly focused on companies with big operations outside Russia.
A Lukoil dollar bond that matures in 2023 had risen to 61 cents on the dollar as of Thursday, according to Bloomberg prices, after falling as low as 31 cents in early March.
Steel company Evraz's 2023 dollar bond had risen to 64 cents on the dollar, having plunged as low as 32 cents earlier this month. The company is incorporated in the UK, although its main operations are in Russia, and its biggest shareholder is the sanctioned oligarch Roman Abramovich.
Analysts said some investors have been attracted by cheap prices, and that Russia-Ukraine peace talks had brightened the outlook somewhat. Russian companies have by and large kept up their bond payments, despite lingering concerns about defaults.
"They are very cheap, obviously, compared to anything else available in the market," Althea Spinozzi, senior fixed income strategist at Saxo Bank, told Insider.
"The second reason is that a lot of the positive sentiment is driven by news that maybe an agreement between Russia and Ukraine is achievable."
Dollar-denominated debt from telecoms company Veon and metals group Nornickel has risen sharply too, while bonds issued by natural gas producer Novatek have climbed.
Spinozzi said whoever is buying is taking a huge risk on Russian corporate debt. She noted that Saxo Bank, like many other lenders, has halted trading in Russian bonds.
Russian corporate-debt trading surged in March, according to market data shared with Insider by MarketAxess.
Trading in dollar-denominated corporate debt averaged out at $144 million a day last month, MarketAxess said, up from $79 million a day in March 2021. However, most of the trading activity came at the start of the month, when investors were rapidly dumping Russian assets.
Spinozzi cautioned that prices may not be a true reflection of the market. She said sanctions had caused huge disruptions to trading and frozen the market in places.
"There are a lot of quotes that come from brokers that want to advertise activity in a certain company. But when you call one of these brokers up, they might not have a market for it," she said.
Bloomberg reported in early March that JPMorgan and Goldman Sachs were among the Western institutions to have scooped up the debt of non-sanctioned companies.
The report earned the banks a rebuke from Sen. Elizabeth Warren, who said they were undermining the effort to freeze Russia out of the global financial system.
A Goldman Sachs spokesperson said the bank's trading activity in Russian securities was designed to reduce risk and help clients cut their exposure to Russia.
JPMorgan declined to comment.