RUSSIA EAGER FOR YUAN BONDS.

Russia is considering what could be the first sale of mainland Chinese yuan bonds by a foreign government after U.S. and European sanctions over Ukraine strangled debt refinancing in dollars and euros and drove the worst bond rout in emerging markets. The world’s largest energy exporter would look to sell a benchmark-sized security in 2016, Russian Deputy Finance Minister Sergey Storchak told reporters in Ankara on Friday. The comments come on the heels of President Vladimir Putin’s visit to Beijing this week to forge closer ties on energy and nurture Russia’s relationship with China, its largest trading partner and neighbor to the south.Russia is turning to China after Western bond markets were slammed shut in the wake of Putin’s incursion into Crimea last year, since which its local-currency bonds have handed investors losses of 45 percent in dollar terms, the most among 32 developing countries tracked by Bloomberg. The government hasn’t sold any Eurobonds in two years, while issuance among companies fell to $564 million this year compared with $10 billion in 2014 and about four times more than that in 2013, the data show. Analyst however feel that this is more of a political move to attract Chinese investors but is unlikely to positively impact Russian corporate borrowers because not many Russian companies have demand for yuan financing."The intention for a sovereign yuan debut came a day after the two countries said they planned to mimic Euroclear Bank SA’s bond, stock and currency-settlement services to give Russian issuers direct access to China’s mainland bond market. Last week, sanctioned lender Vnesheconombank said it’s in talks to sell yuan bonds on the Chinese mainland.Russia’s need for alternative sources of credit has become amplified by the first recession since 2009 and projections that the government’s budget deficit will widen to 3.3 percent of gross domestic product this year, the largest since 2010. In addition to the weight of sanctions, oil, the biggest export earner, has erased half its value in the past 12 months. Investors demand 1.86 percentage points of extra yield to hold Russian corporate dollar debt compared with companies in emerging markets, or more than five times the premium before the annexation of Crimea in March 2014, JPMorgan Chase & Co. indexes show. Yields on the sovereign’s $3 billion bond maturing September 2023 have climbed 82 basis points in that period.