​Russia’s finance ministry issues 250 billion rubles worth of domestic bonds in first quarter

BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/14

For the first time since 2011, the latest government domestic bond issues have been almost fully subscribed. The popularity of bond issues at the moment reflects the rebound in oil prices, expectations of falling interest rates and significant improvement in the liquidity situation of Russia’s commercial banks. The finance ministry says it now plans to issue 270 billion rubles ($4 billion) in new paper during the second quarter of this year.

With about 150 billion rubles in old bonds maturing in the first quarter, the government raised about 100 billion rubles in net terms from the domestic market. For the remainder of the year, some 290 billion rubles in earlier bond issues come due. An annual average of about 550 billion rubles ($8 billion at the current exchange rate) in government bonds are expected to come due during 2017–2019.

Federal domestic, ruble-denominated debt totals 7.24 trillion rubles, or nearly 10 % of GDP. Of that, 1.67 trillion rubles represents guarantees from the state, while about 1 trillion rubles consists of state bonds issued in December 2014 as part of an operation to inject capital into Russian banks. The 2016 budget projects net domestic borrowing of just 300 billion rubles.

Foreign investors hold about 20 % of outstanding ruble-denominated government bonds. When bonds issued to recapitalise banks are not counted, that share rises to slightly over a quarter of domestic bond holdings.

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