Global Bank Prepares to Purchase Armenian Government Bonds in Dram for the First Time

A global bank is preparing to purchase Armenian government bonds denominated in dram for the first time. This information was shared with Sputnik Armenia by Ashot Minasian, head of asset management and brokerage services at Armbrok investment company, during the international conference dedicated to the development of capital markets, held in Yerevan.

He clarified that this pertains to bonds issued in Armenian dram, rather than foreign currency government bonds (Eurobonds). Overall, it is advantageous for Western investors in developing countries to convert their funds and invest in local currencies that provide higher yields.

“We are seeing genuine interest from global banks and are close to executing our first transaction with one of them. They intend to make this type of transaction an investment vehicle for their clients, namely Western investment funds,” Minasian noted.

According to him, the only issue is the small volumes of the Armenian market, which means that Armenian securities are relatively less liquid. However, as interest grows, the number of investors will also increase, thus expanding the market volume.

Of course, the increase in interest rates in the US over the past year is causing capital to flow from developing countries to developed ones. Nevertheless, Minasian stated that Armenian securities still offer a significant yield difference compared to US ones—approximately 11.5% versus 5% when comparing medium-term bonds.

“This is a substantial difference, and if we consider the appreciation of the dram against the dollar over the past year, it turns out that investors who came a year ago would have earned an additional 20% due to exchange rate changes,” he said.

Foreign investors are primarily offered government bonds since the state is viewed as a more reliable issuer, and government securities are more liquid (i.e., easily tradable). Moreover, currently, the electronic “bridge” for purchasing Armenian securities from abroad (through the Clearstream international clearing system) operates only for government bonds.

“Our current goal is to increase the share of non-residents in government bonds. After that, we can discuss opening technical possibilities for corporate issuances as well,” added the financier.

Among the clients of the company are already Russian residents who invest precisely in government bonds. Their interest is heightened due to the fact that they are not subject to any discriminatory treatment in Armenia. In contrast, in the largest Western clearing systems (like Clearstream and Euroclear), Russian investors' accounts are now being segregated, which had not been previously done. This practice applies even to investors unconnected to the Russian government or any organizations under sanctions.

These actions do not have any justification, leading to speculation that one day these accounts may be blocked en masse. “In this regard, investments in Armenian bonds are more protected. The likelihood of such an occurrence happening in Armenia is much lower,” Minasian added.

He mentioned that Russian investors can purchase securities in Armenia without even opening accounts at local banks. The essential requirement is that the client must be transparent and not included in sanctions lists.