Russia's central bank will anticipate sanction risks

Significance

Because the risk of sanctions was priced into Russian bond prices and the ruble exchange rate, the market reaction to the measures announced on April 15 was muted. US investors can still buy and hold OFZs and Eurobonds on the secondary market, but the prospect of further restrictions are possible.

Impacts

• Sanctions risks will weigh down Russia's sovereign credit rating for the foreseeable future.
• Diminished liquidity in the bond market will make it difficult to price new Russian corporate debt, particularly for new issuers.
• Strong economic fundamentals and high foreign reserves will encourage foreign investors to return once uncertainty subsides.