Analysis of the Price Formation of Replacement Bonds

Replacement bonds are a new type of financial instrument issued after the financial sanctions and restrictions of 2022. The uniqueness of these bonds lies in the fact that the issues are denominated in foreign currency, however, transactions and income are settled in rubles at the current exchange rate. The characteristics of these bonds differ from typical corporate or government bonds, and therefore their pricing and yield levels may be influenced by non-standard factors. This study is aimed at identifying the main factors affecting the yield of replacement bonds. For the purpose of the study, daily data were collected on all issues of replacement bonds denominated in dollars. A multiple regression model based on panel data was used as a methodology. The expected result is that the main factor influencing the yield of replacement bonds is the dollar exchange rate. It is also expected that macroeconomic factors will play the most significant role in determining the yield of replacement bonds. The work will also consider the main investment strategies and trends that have developed in the foreign exchange bond market over the past year and a half, as well as a comparative analysis with a more classic instrument: government and corporate bonds with a variable coupon.