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Russian goes big on bonds

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Russian goes big on bonds
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Russia is raising the equivalent of 5.24 billion euros by selling bonds redeemable in five, 10 and 30 years.

Sources told Reuters the sale will fully cover its foreign borrowing needs for this year.

It is the largest offering of government bonds by an emerging economy since at least the year 2000 as Moscow takes advantage of high oil prices boosting confidence in the fiscal performance of the world’s biggest energy exporter.

Russia’s strong fiscal position, with sovereign debt of around 11 percent of gross domestic product, puts it in a position to focus on price and maturity as it seeks to create a benchmark curve for corporate issuers.

But the country’s finances are likely to be strained in the coming years due to planned increases in state spending. If oil prices fall back below $100 a barrel, the country may see a bigger than expected budget deficit in 2013-2014.

This year, Moscow’s finances are likely to be fine, with oil prices above the $117 per barrel level that is needed to keep the budget balanced, ensuring a positive current account balance and windfall revenues to save in its budget reserve funds.

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