Page 85 - RusRPTApr19

8.5.1 Fixed income - bond news
Russia's Ministry of Finance held an all-time record-high weekly OFZ treasury bond auctions on March 13, placing securities worth RUB94bn ($1.44bn) and beating the previous record sale of February 27 when RUB58bn of federal bonds were sold. The ministry proposed shorter-term bonds on the auction, placing RUB34.7bn worth of three-year bonds at 8% and 10-year issue worth RUB56.7bn at 8.47%. Both issues were placed with almost no premium to market, white total demand for two auctions reached RUB144bn. Record-high OFZ sales come after foreign investors sold off some RUB500bn worth of OFZ in 2018 amid sanctions fears. The share of foreign investors in the bond fell from 34% in April to just under 25% by the end of the year. Demand was so poor that the Ministry of Finance had to cancel several auctions towards the end of the year and yields climbed to touch on 9%. But in the latest auctions the demand of foreign investors has been high. According to the Central Bank of Russia (CBR) in February the share of foreigners climbed back from 24.4% to 25.5% in February. For the past month the ministry has been setting limitless auctions only announcing the type and maturity of bonds to be placed. The RUB450bn OFZ borrowing plan for the first quarter is almost complete at RUB383bn. OFZ sales are supported by the renewed global interest in emerging markets, as well as structural liquidity surplus of Russian banks that reached over RUB3.2 trillion, the analysts surveyed by RBC business portal and Vedomosti daily believe. The CBR is also expected to soften the monetary policy by the end of 2019, which fuels the demand for OFZ. Strengthening ruble, stable price for oil, and relative calm on the sanction front all support the Finance Mimicry, BCS Global Markets analysts Sergey Suvorov told Vedomosti. In the meantime foreign analysts see the Venezuelan trail in the record-high demand for OFZ. RBC sites Richard Segal of Manulife Asset Management who links the spike of demand on limitless auctions to the recent sales of gold reserve by Caracas. Another three banking sources that wished to remain anonymous also allowed Venezuelan involvement in the sales of Russian federal government debt. Should these rumours be at least partially confirmed, this would increase sanction risks for the OFZ market. Most recently Russian Evrofinance Mosnarbank has been sanctioned due to its ties with the Venezuelan state hydrocarbon major PDSVA by the US Treasury Department (USTD). Evrofiance was founded in 1993 and has a branch in Caracas after in 2011 Russia and Venezuela agreed to set up a bi-national financial institution to finance joint projects. The bank is
85 RUSSIA Country Report April 2019 www.intellinews.com