Moody’s Investors Service trimmed down further the
credit rating of Russia to less than investment grade because of continuing
financial insecurity in the country.
The rating firm company relegated Russia to Ba1
considered the highest junk level similar to Portugal and Hungary. This
followed Standard & Poor’s verdict to reduce Russia to speculative status last
month.
Moody’s cited current and future international injunctions,
attrition of FOREX cushions, steady decline of crude oil prices, and rising
inflation that adversely affects incomes together with business performance and
consumer confidence.
The world’s largest exporter of energy is close to a
recession after oil fell to the lowest since five years ago and Western powers imposed
penalties on Moscow. These restrictions have forced corporate borrowers out of world
debt markets and reduced investor appetite for the domestic currency and
Russian stocks or bonds.
Demotion to junk from two rating agencies can
compel money managers whose investment policies forbid them from having debt
classified below investment grade to sell $5.8 billion of dollar-denominated
and local bonds, according to reports.
This will lead to forced selling. Eventually, there
will be further deterioration in terms of outlook, according to economic
analysts.
Moody’s decision disregarded economic information made
available by the finance ministry as well as current monetary policies, according
to Russian Finance Minister Anton Siluanov.
The income on $3 billion worth of dollar bonds payable
in 2023 climbed up 1.72 percentage points in 2014 (6.4 percent). The ruble dropped
42 percent to 62.05 per US dollar during that period. It is the worst performer
among 31 principal currencies.
European Union President Donald Tusk has asked
member-nations to impose possible tougher measures due to ceasefire violations
made by Russia.
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