Russian government bonds, a good contrarian play?
 

I just read these 2 articles, looks good. Russia has very low government debt and $400 billion in reserves to throw around.

Moody’s Cuts Russia Debt to Baa3 – Russia pays government interest on debt at 11% of GDP – NOT BAD – TheValueSwan.com

Is a 19% Interest Rate on Russian Government Bonds a good Investment? YES – TheValueSwan.com

As long as the oil price is still dropping, I wouldn't put a dime into Russian bonds :2 cents:

Well the risk is always reflected in yields.....

But right now, you'd have to have BALLS OF SOLID IRON (WHICH ARE ALSO PLATED IN TITANIUM) :1orglaugh:1orglaugh:1orglaugh

Oil will not drop anymore

If it's paid out in Rubles: the effective value of the principle and yield is very speculative.

:2 cents:

I'm sure you are right here, but would it not be reasonable to think that they would have to go back up significantly when oil gets back to 'normal' costs? I guess the problem with that is you could potentially have to wait a decade or two for that to work out..

If oil price will keep at $20-$30 for a rather long period (a few years) and then grow up to $100 again, it won't help. All Russian trading zones will be occupied by Saudis.

They lost like 20% of the govt revenue on this oil drop. They have gone bust not that long ago. Add those two together.

The time to invest is basically when there's blood on the streets and I guess now is better a time than ever to do that - big investors like Soros, Rogers, Mobius are jumping in. Bottom line its the biggest country in the world, oil is *always* going to be in demand and Russia also has shit loads of untapped resources. I think the risk of going bust is not definitely not that high.

If the global economy is crap, demand for oil is lower but if it "stays crap" for long enough someone will make war and war always drives the price up. So the main long term issue is geopolitical....

Perhaps you missed it: We’re at war with Russia - MarketWatch

"The U.S. has been waging economic, financial, trade, and political war against Russia and even kinetic war-by-proxy in Ukraine. Worryingly, nobody in power in the U.S. or Europe really seems willing to tell us exactly why."

I agree with you Rummyboy

didn't the USSR collapse when oil went down to something like $8 a barrel? and haven't the russians really pissed the saudis off?

im not saying it's the same thing, but it is possible someone wants to torpedo the economy and create ideal conditions for themselves, since it's happened before

Yes it is. The problem is that Putin had enough time to straighten Russian economics. But he did nothing. He and his friends just stole all those huge oil money and did nothing for the country. Furthermore, he continues to foster corruption and killing real business in Russia.

heard the current 'point of no return' is $20 for them. but i also heard discussion on what china would want to prop up their government through that

I bought some russian bonds days ago and some petrobras 2021 too.
I suggest you to don't put a lot there but for sure is a nice option if you like risk.
A bond that pays 10%+ is never 'safe' so be careful.

:2 cents:

Porko were those Russian government bonds? And how much were they yielding? Also are you Russian and can anyone buy them?

Hey, all you need to do is ask your bank. They will sale you bonds from the company or gov you wish. Just be sure to understand what are you buying and risk. If you are just starting i suggest you more secure bonds where you can earn 6% a year.

I read an article that suggest that saudi arabia is weaken by his old leaders and its army is not well known to be trustworthy.
If there is a civil war/revolution in this country, it would change the oil price.

It's quite possible, but only if Uncle Sam wishes it ;)

Im not a newbie but it even looks like the Ruble will be an awesome bet.

A interest rate of 19% is highly speculative

You want to invest in Russian bonds?... i suggest you look up the 1998 crisis and review Russia's massive pyramid bond scheme, paying up to 150% interest followed by their inevitable default. I still remember watching Yeltsin give a press conference in the afternoon saying "all is ok, nothing to see here" and "of course we are not going to devalue the Ruble" and in the morning, they did and the entire banking system was shut down, accounts were frozen, 1000+ banks had their licenses unilaterally pulled by the government at the expense of depositors etc etc etc... all without apology.

comrades in motion :winkwink:

as long as i eat not less than 3 times a day, no fuck is given :thumbsup

Well even Russian stocks would (ultimately) achieve that gain. They've been suffering due to the oil price but earnings look terrible because they're ruble's converted into USD (on US markets). So when oil recovers, you get a double POP from the commodity and the currency conversion.

There's also another way to look at this as I've been reading today. Say the OPEC countries push things too far, which they seem to want to do in order to kill the shale and for other reasons, and therefore the oil industry is dropping capital spending to stem losses. You could have a situation 5 years from now (according to some insiders) where oil could completely flip in the opposite direction:

BBC News - Eni warns oil may shoot up to $200 without Opec cuts

In other words, don't necessarily just be looking for a recovery but a *proper* reversal as has happened in so many commodity stories over the years..... that would give your today buys in oil serious ROI.