Russian stock brokers work inside Russia's ruble-based MICEX stock market in Moscow.
Russian stock brokers work inside Russia's ruble-based MICEX stock market in Moscow. - 
Listen To The Story


KAI RYSSDAL: If you can remember back to the labor market of 1983, recalling the global economy circa 1998 shouldn't be too hard. Investors with long memories shiver when they hear the phrase "Russian debt." A lot of people lost their shirts 11 years ago when Russia defaulted on its debt. So there were some questions this week when the Russian finance minister turned up in London and started talking about his plans to issue almost $18 billion in bonds next year. Until not too long ago, the very idea of Russia issuing new debt would have raised some eyebrows. The idea of investing in it might have been considered insane.

But that seems to be changing, as Ashley Milne-Tyte explains.

Ashley Milne-Tyte: Russia has shied away from issuing international debt for years. So why return to the stage now?

Saleh Daher is managing director of investing group Turan Corporation. He says Russia entered the financial crisis months ahead of other countries.

Saleh Daher: So they had to spend an awful lot in their stimulus program so this is basically to fund the stimulus program.

He says Russia doesn't want to build up budget deficits. It would rather borrow. Daher says Russia rocked financial markets 11 years ago when it defaulted on its debt, but bond investors have short memories.

Daher: This is once again a time when people are desperate for returns. Therefore, there is huge appetite for Russia, which is going to come in, you know, a little bit over 2 percent above what U.S. treasuries yield at the same maturities.

He says investors are sick of looking at their money market accounts and seeing next to no interest coming in. And they're betting Russia is on a roll as the price of oil rises. Other commodity prices could follow.

But Joel Kurtzman of the Milken Institute says there's far more to be wary than excited about when buying Russian debt. He compiles a list of countries in order of risk. Russia comes 35 out of 49.

Joel Kurtzman: Corruption levels are very high, the legal system is barely functioning. The accounting standards are pretty poor and the regulatory structure is almost non-existent.

He says things may look rosy for Russia in the short term, but the government issuing those bonds has serious problems.

I'm Ashley Milne-Tyte for Marketplace.