Western sanctions and restricted access to international markets have all but crippled the Russian economy. To start, such actions have already eradicated the value of the ruble. Over the past year, the currency lost nearly 50 percent of its value as oil prices all but crashed and Ukrainian Western sanctions piled on the nation.
Now, various agencies are doling out ‘appropriate judgment’ in regards to the nation’s bonds.
Barclays recently announced they would ‘officially remove foreign Russian currency debts from their global bond indexes.’ This move essentially restricts various globally-based investors from investing or even holding such debts, due to their volatile nature.
After all, junk debts are considered volatile. Moody’s Investor Service recently downgraded Russia’s credit rating to junk status, citing Western sanctions and weak economic prospects as the main reason.
Of course, the move is yet another blow to Russia’s economic prospects.
According to analysts, the move will ‘prevent investors from buying or holding the funds, which may potentially lead to a lot of sell offs.’ An abundance of Russian bond sell offs will make it harder for Russia to raise funds in international markets—or, rather the global markets they still have access to.
Barclays is expected to remove a total of 11 Russian debts: one designated in euros and 10 others designated in dollars. The financial services entity will remove the debts by the end of this month, when they reshuffle their main indexes.
The government debts won’t qualify for tracking within their Investment Grade Global index and Euro Aggregate index. Domestic debts in rubles will continue to track in the Global Aggregate, since they’re still rated at investment grade.
Friday, Moody’s Investors Service downgraded Russia’s credit rating to Ba1 from their previous Baa3 rating. In the previous month, Standards & Poor’s also re-rated Russia to junk status, cutting its rating down to BB+.