Page 56 - bne IntelliNews Country Report: Russia Dec17

6.2.2 Private local debt dynamics
Russian companies are turning to the domestic bond market to raise money thanks to the fall in the rates of the Central Bank of Russia (CBR).
In October, a total of RUB280bn ($4.8bn) of bonds was placed by Russian companies, a 250% increase year-on-year.
The increase was mostly triggered by easing of the CBR's monetary policy and bringing issuers' ratings in line with the regulator's new requirements.
Both Russian and foreign buyers have been attracted by high yields against declining inflation and the CBR's plans to cut the key interest rate even further. In late October, the regulator cut the key interest rate by 25bp to 8.25%. Recent changes in regulations for the Russian bond market also made it more attractive.
Meanwhile, as ruble-nominated bonds have been attractive, Eurobonds have been experiencing an opposite trend. In October, there were only two Eurobond placements by Russian companies for a total of $426mn, compared with seven placements for a total of a total of $2bn in September and six placements for a total of $3.2bn in October 2016.
Apparently, the Eurobond segment is oversaturated as it doubled in January-October to $18.5bn, year-on-year.
Still, there are no signs of saturation of decline in the ruble-nominated bond segment, as another cut in the key interest rate would make domestic bonds even more attractive.
Incidentally, across the entire Commonwealth of Independent States (CIS), t he bond markets have been flourishing as companies eschew traditional banking loans and instead issue bonds to tap the pool of liquidity, betting on falling interest rates and inflation.
6.2.3 Regional debt dynamic
The debt of Russian regions will to rise 7.7% to RUB2.5 trillion ($43.4bn) by the end of this year, the Russian Ministry of Finance said on November 27.
The combined borrowings through issues of securities will jump to RUB352bn in 2017 from RUB154bn rubles in 2016, and the amount of security-issuing regions may rise to 40 from 22, according to Konstantin Vyshkovsky, director of the Finance Ministry’s state debt and state financial assets department.
The regions will also raise RUB1.498 trillion through banking loans and RUB955bn rubles through budget loans this year, the expert said.
Russian President Vladimir Putin approved amendments to the Budget Code of Russia to give Russia’s struggling regions budget fund credits of up to RUB55bn ($941mn) before the end of this year on November 26. The State
56 RUSSIA Country Report December 2017 www.intellinews.com