Russia’s Alternative Currency Bonds
- Dual or Multiple-currency
- Eurobond
Eurobond are the bonds issued by the Europe. Eurobonds can be sold like other bonds in different countries but with the face value stated in Euros (Wheatley, 2018).
- Dual or Multiple-currency
Dual or multiple currency bonds are the bonds that are usually issued for international businesses. In such bonds money can be raised and redeem in different currencies. For these bonds, bondholders are not oblige to buy and sell bonds in the same currency. For instance a bond raised in dollars with redemption taken place in Euro (Wheatley, 2018). An example of this is Russia bond that allow payments (internet payment, maturity payment) in alternative currencies. These bonds are consist of or bundled in two parts. We can unbundled the bonds into constituent parts as new bond maturity and reopening of the bond.
- Comparison
Multiple- currency bonds are the bonds that can be raised and redeemed in different currencies. While alternative currency payment provision is the innovation that support the bondholders to deal with alternative currencies. Alternative currencies innovative idea help out the bondholders get interest amount on the purchased bonds in their own currency while living in other countries (Wheatley, 2018).
- alternative currency payment
Basically, the idea was presented as a solution for the problem commonly faced by the bondholders. It was claimed that many bondholders (Russian bondholders) are from different geographical sector. Interest payments in roubles poses risk factor (Wheatley, 2018). Therefore, alternative currency payment was introduced. Basically, the idea was that Russia would prevent and protect the hard currency payments for bondholders in case of sanctions by the UK and US. As result of this bonds prices were raised as risk factor was reduced.
- Risk factors
| Example | Nature | Origin | Who bears it | Impact on bond prices | Hegde | |
| Financial Risk | Interest rate fall | Moderate Financial risk | Monterey policy change or interest rate changes caused by federal reserves | Bondholder | Decrease in the prices of new bonds while bonds with high interest rate will get increase in their prices | Selling old bonds at high prices |
| Inflation rate | High Financial risk | Inflation caused by unemployment, industries loss, and economic problems | Bondholder
and Issuers |
Bond prices will decrease | Wait for the right moment | |
| Non- Financial Risk | New bonds or alternative bonds | Moderate Financial risk | When bond market goes towards profit new entrants comes in the market with new bonds | Bondholder and Issuers | Decrease in bonds prices | Increase interest rate |
- investment recommendations
Considering all the information presented in the article and risk associated with each type of bond I will recommend ClnvO to invest in the alternative currency bonds. According to my analysis alternative currency bonds has relatively less risk for currency devaluation or depreciation. Because in this type bonds we will have right to select the alternative currency for interest payments. While also considering other benefits associated with this type of bonds I will strongly recommend that ClnvO should invest in alternative currency bonds (Wheatley, 2018).
- Bonus Problem
Russian Federation issuing these debt securities with the purpose to secure a better position in the international market. These bonds has also direct impact on the federal financial reserves of the other countries particularly UK and US (Wheatley, 2018). We all know that decrease in financial federal reserves and increase in debt both cases to influence overall interest rate and inflation rate in the country (Wheatley, 2018). Russia get the currencies of other countries by selling Eurobonds and other securities. Basically, $4 billion bond sales recorded by the Russia will defies United Kingdom Spat as bids roll in. Somehow, it causes to increase overall national debt of Russia because bonds are the liability or debt for Russia and asset for investors. Thus it ties with the foreign currency reserve and Russian national debt.
