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BPLN: The Effect Of Russian Sanctions?

18 July 2014 by HCM

So far the market has decided to largely ignore the sanctions which the US and European countries have begun to impose on Russia. It is indeed difficult to identify a clear trend that would affect financial or oil companies with exposure to Russia for instance. But some argue that the cumulative impact of sanctions is getting harder to ignore, particularly given the recent succession of events in Ukraine and the tragic downing of a passenger plane in Ukrainian airspace. Given its link with Rosneft (it has a 20% stake in the company), some people argue that these worries are behind the recent widening of BPLN’s (BP Plc) risk premium. The trend has been steady since early June, and accelerated during yesterday’s session as the 5 year CDS gapped almost 9bps. This name has now widened by 15bps (which represents a 30% increase compared with the recent tights) and no one has decided to take the other side of the trade yet, despite the best effort of a few dealers.