Page 93 - RusRPTDec20

stable outlook and the local debt at BBB.
S&P has also been fairly consistent on Russia’s rating. Its lowest grade was BB+ (negative) awarded in January 2015. The highest was BBB awarded in December 2008.
8.5 ​Fixed income
By the end of June, the majority of investors started to believe that the potential for more rate cuts by the CBR was largely exhausted. ​As a result, in July-September, Russia saw a mass exodus of foreigners from the OFZ market, putting significant pressures on the RUB exchange rate.
Petr Kazakevich, who heads the Russian Ministry of Finance’s debt department, spoke to members of the press yesterday, 26 November, on the ministry’s plans for December and 2021. The key points are as follows:
Developments in 2020 and the plan for December:
· Due to COVID-19, MinFin had to borrow RUB 5trln net in summer. However, Russia entered the crisis with low levels of debt and high reserves, enabling the ministry to fulfill the program. According to Mr. Kazakevich, Russia could be comfortable with a public debt level of 20% of GDP after several years of greater borrowing, and there is no need to spend funds from the NWF.
· Given that rates reached their lows, it was impossible to issue standard OFZs. Therefore, MinFin switched to floaters. Overall, MinFin has issued RUB 3trln of floaters this year.
· MinFin had to increase the “spread” of floaters to RUONIA from 20-25bps to 50bps by the end of November to meet demand. However, MinFin was only comfortable with such a generous approach to floaters, and it is not ready to apply such an approach to regular OFZs.
· The share of non-residents fell to less than 24% due to the low popularity of floaters among foreigners, for whom local players substituted, absorbing the large demand. However, non-residents have also started looking at the floater market.
· There was no strong crowding-out effect in the private sector, as the Federal Treasury has injected borrowing revenue into the banking sector via REPOs and deposits.
93 ​RUSSIA Country Report​ December 2020 www.intellinews.com