Six Russian lawmakers yesterday went to bond school for the day with the Public Securities Association.
In a two-hour presentation covering municipal bonds, mortgagebackeds, and U.S. Treasuries, PSA officials gave a basic primer to a group eager to find ways to use American-style finance techniques to solve some of their own country's fiscal troubles.
One problem with introducing public securities to a nation with a dubious track record of paying back its bonds is investor willingness to participate, the Russians said.
The other is spiraling inflation.
"There's no confidence in tomorrow," Vladimir I. Novikov, a member of the Russian parliament, said through a translator after the presentation. "And we can't get used to inflation, which is one component of the current instability."
Several of the Russians' questions illustrated their concern with the effects inflation would have on returns, as well as the methods that could be used to protect against fraud and abuse.
R. Fenn Putman, a managing director at Lehman Brothers, talked briefly on how the U.S. system works, and PSA staff gave a series of presentations on various aspects of the market.
George Brakatselos, a PSA vice president, called the municipal market, "the second safest market in the world" behind U.S. Treasuries. But some of the guests wondered, "where's the guarantee" for municipal investors, given the fact that only the central government can print money.
Mr. Brakatselos explained that general obligation investors find comfort in the taxing power of state and local governments, while revenue bond purchasers rely on the financial strength of a particular project.