Most U.S. and European banks had pulled back from the market in June after the Treasury Department banned U.S. investors from purchasing any Russian securities as part of economic sanctions to punish Moscow for invading Ukraine, according to an investor who holds Russian securities and two banking sources.
Following subsequent guidelines from the Treasury in July that permitted U.S. holders to wind down their positions, the largest Wall Street firms have cautiously returned to the market for Russian government and corporate bonds, according to emails, client notes and different communications from six banks as well as interviews with the sources.
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The banks that are in the market now include JPMorgan Chase & Co, Bank of America Corp, Citigroup Inc, Deutsche Bank AG, Barclays and Jefferies Financial Group Inc, the documents show.
The return of the largest Wall Street firms, the details of the trades they are offering to facilitate and the precautions they are taking to bypass breaching sanctions are reported here for the first time.
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Bank of America, Barclays, Citi and JPMorgan refused to comment.
A Jefferies spokesperson announced it was "working within global sanctions guidelines to facilitate our clients' needs to navigate this complicated situation."
A source close to Deutsche Bank stated the bank trades bonds for clients on a request-only and case-by-case basis to further manage down its Russia risk exposure or that of its non-U.S. clients, yet won't do any new business outside of these two categories.
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Some $40 billion of Russian sovereign bonds were outstanding before Russia began what it calls a "special military operation" in Ukraine in February.
Roughly half was held by foreign funds.
Many investors got stranded with Russian assets, as their value plunged, buyers disappeared and sanctions made trading hard.
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In May, two U.S. lawmakers asked JPMorgan and Goldman Sachs for information about trades in Russian debt, stating they may undermine sanctions.
The following month the Treasury's Office of Foreign Assets Control banned U.S. money managers from purchasing any Russian debt or stocks in secondary markets, prompting banks to pull back.
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Regulators have since taken steps to help ease the pain for investors.
The Treasury provided further guidance on July 22 to help settle default insurance payments on Russian bonds.
It also clarified that banks could facilitate, clear and settle transactions of Russian securities if this helped U.S. holders wind down their positions.
Separately, European regulators have further eased rules to allow investors to deal with Russian assets by allowing them to put them into so-called side pockets on a case-by-case basis.
The price of some Russian bonds has jumped alongside the renewed trading activity since late July.
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