The Ministry of Finance borrows like a pandemic

The Ministry of Finance does not reduce the rate of raising funds in the domestic market. Since the beginning of October, in three auction days, the ministry has placed over 1 trillion rubles in government bonds, half of its ambitious quarterly plan. Analysts believe that the Ministry of Finance may raise the bar on borrowing if additional budgetary spending is required due to the worsening epidemiological situation in Russia.

The Ministry of Finance continues large-scale attraction of funds to the budget in the debt market. On Wednesday, October 21, the ministry offered investors three bond issues: eight-year floating-coupon OFZs (OFZ-PK, floater), five-year constant-coupon OFZs (OFZ-PD) and ten-year bonds with an inflation-linked coupon (OFZ-IN ). As in the last two months, the bulk of applications was concentrated in the floater (361 billion rubles), which allowed the Ministry of Finance to attract almost 310 billion rubles. at the weighted average price of 96.186% of the nominal. “The discount, taking into account the terms of circulation, is comparable to the results of the auction a week ago and amounted to 0.48 percentage points,” said Alexander Yermak, chief analyst of debt markets at BC Region.

In particular, the quotations of the floating coupon issue rose to 96.38% of the nominal. “This may be due to the distribution of securities among clients of financial institutions,” says Vladimir Evstifeev, head of the analytical department of Zenit Bank.

At the same time, the Ministry of Finance managed to attract the maximum amount of funds in four months at the auction of OFZ with a constant coupon, which are focused mainly on non-residents. The demand for securities exceeded 40 billion rubles, which made it possible to attract 30.4 billion rubles. at 5.22% per annum. According to Alexander Yermak, for OFZ-PD the discount on the weighted average price was 2 basis points and it does not look great in the context of continued volatility in the market. According to analysts at VTB Capital, the latest auctions for the placement of OFZs with a constant coupon were of interest to non-residents. According to their estimates, over the previous two weeks they increased their investments in OFZs by 36 billion rubles.

“Some foreign investors may look to cut the key rate against the background of the fact that a significant number of central banks in emerging markets resumed easing monetary policy in late September – early October,” analysts at VTB Capital said. At the same time, they expect the key rate to be maintained, although “there are also enough arguments in favor of a reduction.” The regulator’s comments regarding the expansion of the COVID-19 disease in the Russian Federation will also be of great importance for the market. “If the regulator expresses great concern about this trend, then we can expect to reduce the size of the key rate at the end of the year to 4% (now 4.25%. – Kommersant). Nevertheless, from the point of view of the debt market, this will also have a neutral effect on profitability, ”notes Vladimir Evstifeev.

High interest was also noted in the issue of inflationary securities, the demand for which exceeded 25.8 billion rubles. In contrast to the previous auctions, the Ministry of Finance held more than two thirds of the demand and placed securities for only 7.8 billion rubles, the weighted average price barely exceeded 98%.

As a result, the ministry raised 348 billion rubles per day, and from the beginning of the month – more than 1 trillion rubles, thereby fulfilling by more than 50% the ambitious quarterly plan for borrowing (2 trillion rubles). “This allows the Ministry of Finance to pursue a more flexible policy on the primary market for the rest of the year,” analysts at VTB Capital say. Such active involvement may be due to a comfortable environment, which may worsen after the US presidential election. “In addition, the uncertainty with the spread of COVID-19 in the Russian Federation may cause the need for additional budgetary expenditures and their financing,” said Mr. Evstifeev.

Vitaly Gaidaev

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