Even though domestic bonds continue to rally, the outlook is not exactly cloudless.

Although Stella studies lineage and connections, she herself is an anomaly, a self-sufficient woman with no desire for normal domestic bonds.

As for domestic bonds, they should be far more stable in 1995, returning between 7 and 10 percent, Mr. Gregory says.

Even so, "a blip up in rates will have a greater impact on domestic investment-grade bonds."

Because international bonds behave differently from domestic bonds, they lower overall portfolio risk.

The state also plans to issue domestic bonds of 1.2 trillion roubles ($38.9bn) this year to finance budget deficit.

Similarly, if rising rates cut into the returns of domestic bonds, overseas bonds may do strongly.

The legal battle comes as creditors are also pressing Russia to improve the terms it is offering holders of domestic bonds.

FOR investors who believe that the rally in domestic bonds is ending, there may be an overseas alternative.

In the portfolio balance approach, domestic and foreign bonds are not perfect substitutes.