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The Ministry of Finance failed to place Federal loan bonds for 10 billion roubles maturing in February 2024. The auction is declared invalid in the absence of bids at acceptable price levels. Auction on placement of issue the debt declared invalid for the first time since the beginning of October — then it happened with a short, three-year bonds.
on December 19 Mosbirzhe OFZ auction on placement which failed, was trading with a yield of 8.65%. The average yield on Russian government bonds index RGBI was up 8.67%.
in Addition to the five-year bonds today, scheduled auctions on placement of OFZ maturing in may 2020 with a volume of 10 billion rubles of bonds with the indexed face value with maturity in February 2028, that is, bonds linked to inflation. On 19 December, the Ministry of Finance plans to place them on 5,1 billion roubles.
the Auction is held on the eve of the rate decision US Federal reserve and amid falling oil prices (since the beginning of the week Brent crude fell $3 per barrel up to $56.5).
In the third quarter due to a massive sell-off of Russian debt investors-non-residents amid rising geopolitical tensions, the Ministry of Finance managed to occupy the market only 201 billion rubles planned for quarter 450 billion. The plan for the fourth quarter was reduced to 310 billion rubles. In late November, the Finance Minister, first Deputy Prime Minister Anton Siluanov acknowledged that the plan for the placement of OFZ "of course, will not be executed". At the same time, the Minister noted that "the last auction showed strong demand" for government securities, and, according to Siluanov, among investors a sufficient percentage of non-residents.
Forbes Interviewed analysts agree that the auction of the Ministry of Finance did not take place because of the coincidence of several negative factors:the collapse in oil prices, expectations of the fed raising interest rates following the meeting, on 18-19 December, as well as increased geopolitical risks. "The increase in basic interest rates, the fed itself is the ruble weakens, as it entails an outflow of funds from emerging markets. In addition, this measure may lead to an increase in interest rates within Russia itself", — says member of the management Board of IC "Zerich capital Management" Andrey Khokhrin. He notes that in the fall of the world markets of stocks and bonds, which is observed in recent days, the fed rate hike may exacerbate the situation. In this regard, investors are cautious and are not associated with risky assets. "With the collapse of foreign markets will almost certainly follow the fall of the Russian stock market, which, in turn, will pull down and long government bonds," — said Khokhrin. He also recalled that on December 18 the UN General Assembly adopted a resolution criticizing the militarization of the Crimea. "I think this resolution has dramatically reduced the number of foreign investors looking to return to the OFZ market", — concluded the financier. In such a unfavorable situation, the Ministry of Finance may place bonds only by offering investors a large premium to the average market return, the expert adds CC "Finam" Alexey Kovalev. "However, the Finance Ministry is not ready to provide a substantial prize in return for placements. While his priority is maintaining an acceptable cost of placements, rather than increasing the volume at any price", — says the analyst. In his opinion, the situation may change in 2019, when the Finance Ministry will have to host auctions large amounts to Finance the "may decree" of the President.
George PERMITIN, Forbes Contributor, Daniel SETLOW, Forbes Staff
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