OFZ issuance: Finance Ministry fulfilled 17.3% of quarterly plan in one auction day

RUSSIA ECONOMICS - In Brief 07 Oct 2020 by Alexander Kudrin
On Wednesday the Russian Finance Ministry placed a record high amount of OFZ. During two auctions it managed to place a 10-year floater (linked to RUONIA rate) worth to R316 bln and a 5-year fixed-rate paper worth to R30 bln. In such a way the Government covered more than 17% of the quarterly plan, which was set at R2 trln. To remind the previous record for the single auction was set at the beginning of September when the Finance Ministry sold 6-year floater totaling R188 bln.The demand for floaters is coming from the domestic financial sector. These bonds are placed with a certain premium to RUONIA (35-45 bps), which allows banks to fix quite an attractive margin in risk-free instruments. Besides, domestic investors think that chances for any further CBR rate cut are limited. Moreover, the regulator recently articulated the idea that under certain conditions the key rate might be increased in 1.5-2 years from now, which fuels interest in floaters as a defensive asset.Given the moderate lending activity of commercial banks, the demand for floaters is likely to remain in place in the coming months. If so, the Finance Ministry will have chances to raise R1.6-1.8 trln via OFZ placements in Q4’20. Of course, issuance of floaters means that the Government is accepting additional interest rate risk, but the price looks reasonable. GKEM Analytica mentioned in the report published on Sep 14, that Russia’s 2020 budget spending depends on its ability to borrow. The result of recent auctions shows that the government spending plans may be executed almost in full.Evgeny GavrilenkovAlexander Kudrin

Now read on...

Register to sample a report

Register
Sign-in
Forgot your password?
Copyright 2024 GlobalSource Partners. All rights reserved. This is prepared for GlobalSource Partners’ clients and may not be redistributed, reproduced, stored in a retrieval system, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of GlobalSource Partners. This is distributed simultaneously to our website and other portals used by GlobalSource Partners. The information herein was obtained from various sources and is believed to be reliable but GlobalSource Partners does not warrant its completeness or accuracy. Neither GlobalSource Partners nor any Country Analyst, officer or employee accepts any liability whatsoever for any direct, indirect or consequential damages or losses rising from any use of this or its contents.