Benchmark index provider FTSE Russell said it will drop Russian bonds from its fixed-income indexes at the end of March because of Western sanctions in the wake of Russia's Feb. 24 invasion of Ukraine and trading constraints.
The March 4 notice came two days after it took similar steps for Russian equities, deleting them from all equity indexes as of Monday. That is also the effective date for when price and accrued interest for all ruble-denominated government bonds, hard currency domestic government bonds and explicitly sanctioned Russian entities will be set to zero, "in recognition of the practical impact of the capital controls imposed by the Russian government on investors," according to a March 4 FTSE Russell update.
On March 9, MSCI Russia indexes also will be reclassified from emerging markets to stand-alone markets status.
FTSE Russell said in the notice that the decision on Russian bonds follows feedback from market participants and external advisory committees indicating "a complete inability for international investors to repatriate bond proceeds in ruble and non-ruble denominated assets from the Russian government and Russian bond-issuers" that led to a "complete or near complete lack of price discovery mechanisms."
The sanctions also caused "significant impairment of the ruble foreign exchange market" and led the index provider owned by London Stock Exchange Group to change its market accessibility rating for local currency for purchasing fixed-rate Russian government bonds to "unassigned," effective immediately, the notice said.
The index changes will be reflected in April index profiles.