Russia's second largest bank has become the first company of one of the emerging markets outside Asia to sell bonds

VTB Group, Russia's second largest bank has become the first company of one of the emerging markets outside Asia to sell bonds denominated in Chinese yuan, reduce the cost of raising money by looking east instead of west.

VTB sold 1 million yuan ($ 150 million) three-year bonds yielding 2.95 percent today. The offer was "oversubscribed significantly, with Asian investors accounting for about 90 percent of the sale, the bank said in a statement. VTB ruble bonds due in October 2013 are yielding 7.58 percent and the rate of dollar bonds in March 2015 is 5395 percent.

The Moscow-based bank is McDonald's Corp. and Caterpillar Inc. in the sale of debt debut yuan this year to expand its funding sources. Russia and China are trying to promote the use of international currencies, as well as bilateral trade to dilute the dominance of the euro and the dollar. Moscow's MICEX stock exchange to introduce the ruble trade December 15 yuan, after China allowed its currency to trade against the ruble in the interbank market on 22 November.

"This proves the point that major emerging market currencies are becoming the reference value," said Luis Costa, emerging markets strategist at Citigroup Inc. in London. "It's a long road to tread, but the perception of development compared with developed markets risk is about to dissipate in the future."

The sale will be the first of China's currency to a Russian company, as well as any vendor in the emerging markets outside the region of Asia. The ruble weakened 5.3 percent against the yuan this year.

More Currencies

VTB sold 400 million Singapore dollars ($ 305 million) of two-year notes yielding 4.2 percent in July. Notes was 3.604 percent today.

The state-owned bank also plans to offer debt in Brazilian reais. VTB postponed its debut sale of bonds in five years last month, citing market volatility. VTB also said it could sell bonds in yen, Hong Kong dollar and Korean won.

Sales of debt in emerging market currencies are part of the bank's strategy to broaden its investor group, Vice President Herbert Moos, said in an emailed response to questions on 8 December. The plan shows the BRIC countries - Brazil, Russia, India and China - can sell debt among themselves, he said.

The yuan bonus means "the emergence of a new global trend of the emission BRIC BRIC" said Moos.

McDonald's became the first international company to issue non-financial debt in China's currency, when it sold 200 million yuan, 3 percent notes due in September 2013 on 20 August. Russia United Co. Rusal, the world's largest aluminum producer, also plans to sell yuan-denominated bonds, as it expands its presence in China, Oleg Mukhamedshin, leads the nation in capital markets, said in September.

Currency risk

While the sale of debt in China's currency allows companies to "explore other sources of wealth in emerging markets," VTB is unlikely to be followed by many issuers of Russia because the risk of currency appreciation and limited trade to reduce the attractiveness of lower yields, said Costa.

Yields about 3 percent may also be too low for investors, said Sergio Dergachev, who helps manage the equivalent of $ 8.5 billion in emerging market debt Union Investment in Frankfurt and not buy the bonds.

"The bond may be of interest to those who bet on rising yuan," said Dergachev.

Investors expect the yuan to strengthen by 2.2 percent against the dollar within a year of 6.5115, according to non-deliverable, or NDF, followed by us.

Ruble Rate

The exchange rate has changed little, less depreciation of 0.1 percent to 30.9350 per dollar in trading in Moscow today. Opinions that provide guidance to the expectations of currency movements and interest rate differentials and allow companies to meet, show the ruble 31.2006 per dollar in three months.

Russian bonds in 2020 to the dollar were little changed, leaving production to 4.922 percent. The price of ruble notes maturing in August 2016 the country remained unchanged, maintaining the yield to 7.31 percent.

The cost of protecting Russian debt against default by five years using credit-default swaps fell 1 basis point to 145 yesterday, down from the peak this year of 217, according to data provider CMA. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent of a government or a company fail to adhere to its debt agreements.

Swaps credit-default for Russia, rated Baa1 by Moody's Investors Service, the third lowest investment grade rating, cost 14 basis points more than the contracts in Turkey, classified as four levels lower than Ba2. Russia swaps cost as much as 40 basis points less on 20 April.

Extra Performance

The extra yield investors demand to hold the Russian debt rather than U.S. Treasuries fell 1 basis point to 202, according to JPMorgan EMBI + index. The difference compared to 124 for Mexico's debt with similar qualifications and 167 for Brazil, two steps that is rated below Baa3 by Moody's.

The yield of Russian bonds is 30 basis points below the average for emerging markets, down from a maximum of 15 months from 105 in February, according to JPMorgan.

yuan in bonds issued by Chinese companies have returned 3.4 percent this year from 09 December, according to the rate of Bank of America Merrill Lynch. corporate debt denominated ruble gained 4 percent this year, the CBI Micex index shows.

China overtook Germany as a trading partner of Russia's second largest in the first six months of this year, fueled by exports of raw materials producers in Russia and Moscow-based Rusal, OAO GMK Norilsk Nickel and OAO Rosneft. China and Germany accounted for 8.4 percent of total turnover of trade in Russia in the first 10 months of 2010, according to the data.