Large state-owned banks continue to almost single-handedly cover Russia’s budget deficit by buying up federal loan bonds at the Ministry of Finance’s weekly auctions.
On Wednesday, April 7, the department managed to mark OFZs for another 90 billion rubles with a demand of 120 billion.
Investors brought 73.4 billion rubles for the auction of 10-year OFZ-26235 and 47 billion for the placement of 14-year OFZ-26233.
The Ministry of Finance sold the first issue for 54.7 billion rubles at 7.3% per annum, and the second – for 37.3 billion at 7.43%.
“The demand turned out to be significant in conditions when many local and foreign market participants were fleeing Russian assets,” says Alexander Losev, General Director of Sputnik AM in Moscow.
Against the background of the fall of the ruble, the escalation in the Donbass and the threat of sanctions, the state’s bailout appears to have come from banks, banks with state participation, Losev says.
For the second week in a row, the Ministry of Finance auctions are held in an intimate circle. One or two “strategists” confidently buy almost the entire volume, today 80-90% went into one hand, says Viktor Tunev, Managing Director of Agidel Management Company: “The hand of one trader is given out equal volumes and the principle of setting prices in competitive bids (non-round prices for the entire width of the narrow range) “.
In the second quarter, the Ministry of Finance planned to sell OFZs worth a trillion rubles, but hopes of attracting foreign investors are dashed as the situation in Donbass heats up and the Joe Biden administration sharpens the blade of sanctions: by the end of March, non-residents dropped OFZs worth 1.6 billion dollars – a record amount for the year.
Lacking anything better, the authorities “decided to rely on the patriotic demand of large participants,” Rosbank analysts write.
On March 31, at the auctions of the Ministry of Finance “out of nowhere” there were applications for hundreds of billions of rubles, which allowed the department to cover a third of the quarterly plan for loans in one day.
According to Bloomberg, out of 335 billion rubles of OFZs sold then, almost half – for 158 billion – was acquired by VTB alone. Sberbank, the largest holder of government securities with a portfolio of 3.3 trillion rubles, increased investments in OFZs by 140 billion rubles by the end of March, that is, bought 25% of all securities placed by the Ministry of Finance, follows from its statements.
The Ministry of Finance itself provides money to state banks, notes Tunev: over the past two weeks, it has poured 768 billion rubles into the banking system for deposits and under repo agreements.
