Russia to issue yuan-denominated government bonds

Russia prepares issuing Chinese yuan-denominated government bonds worth 1 billion. Dollars next year, reports Financial Times. The move could create a new source of funding for Russian banks and companies whose access to the capital markets of the US and Europe was cut off because of the sanctions, the newspaper notes.

Expansion of yuan

The issuance of such debt would be another step in the international expansion of the yuan, which was recently included in the basket of reserve currencies to the International Monetary Fund (IMF). The move could also lead to use in China of ruble-denominated bonds. China encourages such cross-currency lending and other emerging markets, undermining the dominance of the dollar.

“The issue will set a benchmark yield yuan for the Russian Federation, which may also benefit corporate issuers,” said Dennis Shulakov responsible for capital markets Gazprombank. “This is the first end. The second is to diversify its investment base for Russian borrowers and provide a new source of liquidity,” he added.

From the perspective of China these bonds will increase the international leverage of the yuan. The IMF said the Chinese currency to the dollar, euro, yen and British pound in the basket of Special Drawing Rights, which determines in which currencies the Fund may lend.