In October, floating rate bonds became popular in the corporate segment

In October, corporate issuers increased activity in the domestic debt market. During the month, they attracted over 400 billion rubles, which is 40% higher than the results of September. More than half of the placed volume was accounted for by organizations in the financial sector. Against the backdrop of an active increase in the key rate, companies in the real sector also increased their activity, but primarily in the segment of floating rate bonds.

According to Kommersant’s assessment, based on preliminary data from the Cbonds agency, in October corporate borrowers significantly increased activity in the domestic debt market. In total, 113 placements of ruble bonds were carried out for a total of 403 billion rubles. This is more than 40% higher than the result of the previous month and almost three times better than the October 2022 figure.

After an emergency increase in the key rate by the Bank of Russia in August by 350 bp. p., to 12%, activity on the primary bond market decreased in September, as a number of issuers took a wait-and-see approach until there was certainty in the regulator’s further actions. But the regulator continued to raise the rate (by the end of October it reached 15%) and toughened the rhetoric. Denis Leonov, head of the debt capital markets department at BCS CIB, notes that many issuers tried to manage to place their shares before the next meeting of the Central Bank, which took place on October 27. “Today, the understanding that high rates in the market will last for a long time forces issuers to enter the public market and attract financing at current rates,” says Tatyana Ambrozhevich, head of the debt capital markets office of Rosbank.

At the same time, the strong result in October was made possible due to the active placement of bonds by issuers of the financial sector, for which the increase in the key rate is not so critical, since they pass it on to clients. According to Alexander Ermak, chief debt market analyst at BC Region, such issuers accounted for over 55% of the placement volume. In particular, banks placed 54 issues worth more than 227 billion rubles. Almost two-thirds of the total volume was accounted for by the placement of Gazprombank (RUB 150 billion).

In the real sector, it was mainly first- and second-tier issuers with large loans of 15–45 billion rubles. Their peculiarity was the predominance of issues with floating rates (floaters). Thus, in seven placements the coupon rate was tied to the interbank lending rate RUONIA, in one issue – to inflation and to the key rate of the Bank of Russia. As Alexander Ermak notes, for high-quality issuers of the first and second echelons, the primary market for fixed-rate bonds was practically closed in October.

In the current uncertainty, investors give preference to bonds with floating rates, which is evident not only in the corporate segment, but also from the results of auctions of the Ministry of Finance, notes Tatyana Ambrozhevich. In addition, issuers themselves do not want to fix rates for a long period. “Many people prefer floaters in the hope of reducing the cost of debt servicing when the key rate is reduced next year,” the expert notes.

By the end of the year, market participants expect further growth in activity. As Denis Leonov notes, the market will continue to adapt to new conditions.

Vitaly Gaidaev