Happy Independence Day to those celebrating today.
Elsewhere, in “a triumphant vote of confidence”, Putin’s yes-or-no referendum fell in his favour, allowing him to extend his 2 decade term as Russia’s president for a further two terms, through to 2036 when he will be 83. According to the election commission, out of a turnout of ~68%, 77.92% of voters are in support of the constitutional amendments, with less than a quarter of voters against the changes. A large proportion of the yes votes apparently came from Crimea, which was annexed by the Russian Federation in 2014. Vast reports suggest the election was rigged claiming there was little correlation with the exit polls. In fact Putin was so confident of a win that copies of the new constitution had hit bookshelves ahead of the final day of voting.
Aside from lengthening the allowable term for a Russian president to serve, the referendum package had over 200 amendments which included attractive items such a guaranteed minimum pension and minimum wage limits as well as the formation of a more “responsible attitude” to animals. Interesting considering fluffy cats were reportedly given away alongside some exciting raffle prizes at polling stations and during canvassing. Other items included conservative views such as the constitutional mention of “faith of God”, enforcement of marriage being between man and woman only, calls to preserve the Russian language and the country’s history, and a ban on top officials holding dual citizenship.
Whatever the case may be, Putin has affirmed his own power. Further reinforced by likes of India’s PM Modi who called to congratulate Putin, who following the call “reiterated his commitment to further strengthen the special and privileged strategic partnership between the two countries in all spheres”. Russia’s 5-year CDS has also settled to pre-voting levels, although it still remains above this year’s average. We do not hold any Russian government debt, as it trades expensively, the USD 5.25% 2047s issue, for example, is priced at a spread around 106 bps over, versus similar bonds which on average trade at 177bps over. Therefore the Baa3/BBB rated bond is being priced as a A3/Baa1 issue; i.e. two notches expensive. We would rather hold state-owned Abu Dhabi Crude 4.6% 2047s. Rated AA the bond offers an attractive expected return and yield of ~20.5% with the added benefit of a 4.4 credit notch cushion.