Debts are being yuanized – Newspaper Kommersant No. 183 (7384) dated 10/04/2022

In September, the activity of issuers in the domestic debt market significantly decreased compared to August – companies borrowed 74 billion rubles. less, with half of the 386 billion rubles. of the total volume of placements accounted for issues denominated in yuan and dollars. The decline in issuers’ activity is facilitated by the Central Bank’s hints that the period of rapid reduction of the key rate is over, the international situation, the plans of the Ministry of Finance for borrowing, which led to a sharp increase in rates on the market. Prior to the normalization of the geopolitical situation, the activity of issuers in the primary market will be reduced, its participants believe.

According to Cbonds, in September corporate borrowers made 62 placements for 386 billion rubles, which is almost 63 billion rubles. higher than the same period in 2021. However, compared to the previous month, the activity of issuers has noticeably decreased – in August, 66 placements were made for 460 billion rubles, a record result since December 2021 (see Kommersant dated September 2).

It is indicative that more than 40% of the total volume of placements in ruble terms fell on issues denominated in yuan and dollars. Thus, in September, two issues of HC Metalloinvest and one issue of Rosneft were placed with a total volume of CNY 17 billion. “The total volume in yuan in September almost doubled that of August,” said Alexander Yermak, chief debt markets analyst at BC Region. In addition, placement of one “substitute” bond issue of Gazprom Capital (for $304 million) was completed in September. In addition, the placement of the EDB issue for $700 million was not included in the general statistics of Cbonds.

Excluding foreign-currency bonds, the primary market for ruble-denominated debt fell 1.5 times to RUB 222 billion. The main decrease occurred due to companies in the real sector. According to Alexander Yermak, in September, such companies borrowed 64 billion rubles, which is 20 billion rubles. less attraction in August. About 44 billion rubles. amounted to the volume of placement of bonds of state corporations. “Almost doubled compared to August, to 23 billion rubles, the volume of placement of structural and investment bonds of credit institutions and the Siberian Federal District has increased. About 3.6 billion rubles. I had to place bonds of leasing companies and IFC,” notes Mr. Yermak.

According to Denis Leonov, head of the debt capital markets department at BCS Global Markets, this is absolutely atypical for a standard situation in terms of seasonality. “In September, the transaction pipeline was very large, but issuers were forced to postpone placements due to deteriorating market conditions,” says Pavel Vintin, director for investment banking services and capital markets operations at Rosbank. According to the Bonds Lab resource, by the end of the month, seven major issuers announced placements with the issue volume of about 40 billion rubles.

However, according to market participants, in the second half of September, he fell into a “perfect storm” caused by a combination of several factors. First, having announced at the end of the September meeting that the key rate would be cut by 0.5 percentage points (pp) to 7.5%, the Bank of Russia did not predict its further reduction. Moreover, the regulator did not rule out a rate hike. Secondly, in the second ten days of September, the Ministry of Finance announced large-scale borrowings for the next three years. In 2023, the ministry plans to place government securities for 1.75 trillion rubles, in 2024 – for 1.94 trillion rubles, in 2025 – for 2 trillion rubles. Thirdly, at the end of the month, geopolitical risks increased sharply in connection with the announcement of partial mobilization in the country and the annexation of four new territories.

Under such conditions, OFZ yields grew by an average of 1.4 percentage points per month and for long-term issues exceeded the level of 10% per annum. “To the levels of April, not only the average level of rates increased, but volatility also increased sharply. An unsuccessfully chosen day, on which sales in the markets may occur due to the news background, can lead to an unsuccessful and expensive placement,” says Maxim Petronevich, Senior Economist at FC Otkritie Bank. Under these conditions, the Ministry of Finance twice refused to place OFZs, and as a result attracted 10 billion rubles. out of 40 billion rubles planned for the third quarter (see Kommersant of September 27).

In the next two months, activity of issuers on the ruble debt market will be low. “The behavior of both issuers and investors will primarily depend on the development of geopolitical events,” notes Denis Leonov. According to Pavel Vintin, market recovery is possible after the stabilization of the geopolitical situation, while he does not expect rates to return to the local lows of August-September. At the same time, market participants do not rule out new placements in yuan, which remain attractive to issuers due to the low cost of borrowing. In August-September, four companies placed such issues, yielding 3-4% per annum. “This is even lower than the return on initial placement, which these companies previously received by placing in dollars,” notes Maxim Petronevich. “The issuers consider these instruments as an alternative to classic Eurobonds, so bonds in foreign currencies on the domestic market will continue to develop,” Denis Leonov sums up.

Vitaly Gaidaev