Russia refuses to place Eurobonds

Russia refuses to place Eurobonds

Russia's Finance Ministry sees no particular need to issue Eurobonds this year, Deputy Russian Finance Minister Sergei Storchak said. The Finance Ministry plans to focus on the domestic debt market, he noted, describing it as an absolute priority.

He said that external borrowing as a source of the budget deficit financing is not a priority, pointing out that there is no "deficit" either. “Therefore, there is no special need to enter foreign markets," the Deputy Finance Minister explained.

In March, Russia's Finance Ministry floated Eurobonds worth $3 billion and mature in 2035, and an additional Eurobonds placement in euro worth 750 million euro and mature in 2025. The final yield guidance for dollar-denominated Russian Eurobonds was fixed at the level of 5.1% and for euro-denominated Eurobonds - as 2.375%. VTB Capital and Gazprombank are acting as arrangers.

Storchak also noted that the Finance Ministry expects a continuous high demand for OFZ bonds.

The former deputy chairman of the Russian Central bank, head of the finance, monetary circulation and credit department at RANEPA, Alexander Khandruev, speaking to Vestnik Kavkaza, noted that despite the budget surplus, government bonds is an important part of government fiscal policy. "Debt securities should be issued to be in portfolios of commercial banks for refinancing to ensure the liquidity. Without a large government securities portfolio, the Bank of Russia will not be able to pursue a neutral monetary policy. Quantitative easing was based on the fact that the Fed and the ECB have accumulated large government securities portfolios," he said.

"The deficit-free budget has its advantages, but at the same time it creates problems for the development of the debt market. The debt market must be developed. But it should not be overheated," Alexander Khandruyev added, noting that the Ministry of Finance's focus on national debt market does not mean that government bonds will not be available for purchase by non-residents.

The professor at the department of the stock market and investments at the Higher School of Economics, Alexander Abramov, in turn, recalled that the Russian Ministry of Finance has always been cautious in the foreign debt market. "Storchak's statement probably means that the Ministry of Finance will mainly borrow in the form of government securities on the domestic market. But I would not link it with the development of the stock market - the fact is that the large borrowings by the Ministry of Finance have a negative effect on private companies' securities," he pointed out.

"The Ministry of Finance plans to ensure stability at any cost, therefore, it builds up an emergency stash, regardless of whether the budget is surplus or deficit. In terms of common sense, the Ministry of Finance does not need to borrow at all, but this is its stability strategy, set forward the problems of economic development," Alexander Abramov concluded.