Companies and banks are in a hurry to borrow

The results of November turned out to be unexpectedly good for the public debt market: within a month corporate borrowers placed ruble bonds worth 570 billion rubles, almost six times more than in October. Against the backdrop of stabilization of market conditions and fears of raising the key rate of the Central Bank next year, banks that had previously refrained from such placements also began to issue classic bonds. In December, the activity of issuers is expected to be high, while maintaining a favorable environment.

In November, Russian bond issuers sharply increased their attraction in the domestic debt market. According to Kommersant’s estimates, based on preliminary data from Cbonds, the total volume of ruble-denominated attraction of companies amounted to almost 570 billion rubles, which is almost six times higher than the result of the previous month. The estimates do not take into account placements of replacement bonds totaling RUB 1.2 billion. in dollar terms. Companies borrowed a larger amount of funds in December 2020 (over 1 trillion rubles). In November this year, the companies also made five placements of foreign currency bonds denominated in yuan, totaling more than 10 billion CNY, which is 4 billion CNY more than October.

The activity of issuers was significantly influenced by the stabilization of the situation in the secondary market.

Over the past month, OFZ yields fell by an average of 13 basis points (b.p.) on the market, and over a two- to five-year horizon, at which corporate bonds are usually placed, the decline was an average of 25 bp. n., up to 8–9%. As a result, according to Pavel Vintin, Director for Investment Banking Services and Capital Markets Operations at Rosbank, the volume of demand accumulated over the period from late September to early November spilled onto the market, when the market was actually completely closed against the background of the peak of geopolitical risks. “Pending demand has been superimposed on the traditional surge of activity before the end of the year,” the expert points out.

An important role in the behavior of issuers was played by changes in the monetary policy of the Central Bank. As a result of the October meeting, the Bank of Russia left the key rate unchanged (7.5%), which was preceded by six reductions in total by 12.5 percentage points. As a result, market participants started talking about the fact that the potential for lowering the rate has been exhausted. “Uncertainty about the movement of rates in the ruble debt market and the existing likelihood of their increase next year predetermined the desire of many issuers to take advantage of the favorable moment,” said Alexander Yermak, chief debt markets analyst at BC Region.

For the first time since the beginning of the year, there has been a high activity of companies in the financial sector. According to Mr. Yermak, in November the banking sector accounted for about 137.2 billion rubles. placements. A month earlier, banks borrowed less than 5 billion rubles. as part of the placement of investment and structured bonds, other companies in the financial sector borrowed 29 billion rubles. Credit institutions, according to market participants, began to more actively enter the primary market to equalize balance sheets. In recent months, banks have been actively participating in the OFZ placements of the Ministry of Finance, which borrowed more than 1.2 trillion rubles only within the framework of OFZs with a floating rate.

Market participants expect activity to continue at least in the first half of December.

At the end of last week, several issuers at once collected applications for bond issues, the largest of which was the placement of two-year bonds by VEB.RF for 25 billion rubles. and “X 5 Finance” for 20 billion rubles. In both cases, due to high demand, the final volume of placements was increased relative to the initial volume by 5 billion rubles. “At the moment, the market is open to almost all sectors and industries,” says Denis Leonov, Head of DCM at BCS Global Markets.

“Geopolitical tensions continue to remain high, adding to it growing inflationary risks and volatility in the oil and gas market associated with the introduction of a price ceiling for Russian oil,” said Arseniy Avtukhov, an analyst at Sovcombank. “For these reasons, issuers will try to increase borrowing in an understandable market environment. In the coming months, we should expect several placements of yuan bonds by exporters.”

Vitaly Gaidaev