Russia plans to scale down state domestic borrowing after 2020

© Reuters.

By Darya Korsunskaya

MOSCOW (Reuters) – Russia’s finance ministry plans to scale down selling of OFZ treasury bonds in 2021 and beyond, hoping the budget will no longer require massive borrowing as it did this year amid the global coronavirus crisis, a senior official said.

Running out of options to bolster public finances strained by the pandemic and the collapse of oil prices, its main export, Russia has more than doubled its domestic borrowing plan in 2020.

Russia has raised around 5.2 trillion roubles ($68.84 billion) in OFZ bonds by end-November and eyes selling 3.7 trillion roubles worth of OFZs in 2021, said Pyotr Kazakevich, head of the state debt department at the finance ministry.

“We assume that 2020 is a unique year for the Russian budget and that such massive borrowing will not be needed in the coming years,” Kazakevich told reporters late on Wednesday.

By the end of the year, Russia may need to borrow up to 350 billion roubles more, Kazakevich said, testing demand for various OFZ tenors.

On one auction day in late October, the finance ministry managed to borrow a record 436 billion roubles with the help of state-run banks, the main buyers of OFZ bonds that used to be popular among foreign investors thanks to lucrative yields.

OFZ yields fell this year as the Russian central bank slashed its key interest rate to a record low of 4.25% to support the economy with cheaper funds. But Russian yields remain attractive versus many of its peers.

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Non-residents’ share among holders of OFZs stays at 25-30%, having slipped recently as the finance ministry increased offering of OFZ with coupon payments pegged to money-market rates, so-called floaters, while foreigners prefer fixed coupon instead, Kazakevich said.

“We don’t feel panic mood from non-residents now… We can not rule out the imposition of new sanctions against state debt but we deem them unlikely as, to a large extent, it will be against the interests of foreign investors.”

Shrugging off Washington’s decision to impose restrictions for U.S. banks on buying sovereign Eurobonds directly from Russia, Russia tapped the global Eurobond market in November, raising 2 billion euros ($2.38 billion).


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