in July 2023, corporate borrowers attracted more than 620 billion rubles on the debt market.

July turned out to be very successful for the public debt market: over the month, corporate borrowers placed ruble bonds for more than 620 billion rubles. Issuers were in a hurry to raise funds before the key rate increase, which turned out to be stronger than the market expected. Despite the traditional decline in business activity in August, market participants expect a slight decrease in issuer activity amid expectations of further tightening of monetary policy (MP), as well as growing investor interest in higher-yielding securities.

According to Cbonds, in July the companies raised more than 624 billion rubles in the debt market, the best result this year. It is more than three times higher than the same period in 2022 and the best result for this month. Many placements took place with noticeable oversubscription. According to Alexander Yermak, Chief Analyst for Fixed Income Markets of BC Region, for every fourth placement, based on the results of the collection of applications, the volume of bonds offered was increased. In particular, VEB.RF increased the volume of placement from 30 billion to 40 billion rubles, Russian Railways – from 20 billion to 30 billion rubles, ER-Telecom Holding – from 5 billion to 11 billion rubles, Alfa-Bank – from 5 billion to 10 billion rubles.

The structure of the primary market has also noticeably changed. If before the main volume of placements was accounted for by companies in the real sector, then in July the financial sector became the leader. According to Alexander Yermak, this segment accounted for more than half of the total volume of placements. This became possible primarily through two large transactions – with mortgage bonds “Dom.RF” (197.4 billion rubles, issued on the basis of loans from Sberbank) and VEB.RF (40 billion rubles). Also, 3.8% accounted for structural bank bonds and 3.6% for bonds of leasing companies, said Mr. Yermak.

The real sector accounted for 43% of the total market. Here, the largest deal was the placement of perpetual bonds of Gazprom Capital in the amount of 120 billion rubles. According to PSB chief analyst Dmitry Monastyrshin, the predominance of high-quality issuers is due to the low share of SMEs in the Russian economy, as well as the desire of investors to form reliable assets and reduce risks.

July is traditionally not the best month in terms of borrowings in the domestic market. This year, increased activity of issuers was facilitated by expectations of a rise in the key rate of the Central Bank, as this leads to an increase in the cost of borrowing. On July 21, the regulator raised the rate by 100 basis points (bp) at once, to 8.5%, although most experts expected an increase of only 50 bp. n. (see “Kommersant” of July 22).

“The peak of corporate placements in July fell on the period before the Central Bank made a decision on the key rate. Issuers have stepped up to have time to place before this moment,” says Denis Leonov, Head of the Department of Debt Capital Markets at BCS CIB. According to Aleksey Kupriyanov, head of the investment and corporate unit at IB Sinara, those who planned placements for late July-early August tried to enter the debt market as early as possible in an attempt to fix more attractive rates on their loans.

Alfa Capital Portfolio Manager Yevgeny Zhornist draws attention to the very strong demand for securities in the primary market on the part of private investors. According to the Moscow Exchange, in the first half of the year, individuals bought bonds for almost 430 billion rubles. “Demand depends on the yield premium that corporate issuers are willing to give in relation to OFZ. With the growth of yields on government bonds, the yields on corporate papers also increased,” says Mr. Zhornist.

Taking into account the high figures in July, market participants do not rule out a slight decrease in activity in August. “Traditionally, in August, business activity declines due to the vacation period,” notes Denis Leonov. In addition, market participants will need some time to assess the further monetary policy of the Central Bank. Nevertheless, Alexei Kupriyanov does not expect a significant slowdown in the debt market. Issuers, he notes, are in the phase of waiting for the next increase in the key rate of the Central Bank, and investors have even benefited from tightening the monetary policy.

Vitaly Gaidaev