Recessions in borrowings are short-lived – Newspaper Kommersant No. 203 (7404) dated 11/01/2022

In October, corporate borrowers attracted about 150 billion rubles on the domestic debt market, showing the worst result since the beginning of the summer. Issuers’ activity decreased due to high uncertainty against the backdrop of increased geopolitical risks, which led to an increase in borrowing costs. Only at the end of the month, as rates fell, issuers began to return to the market. Until the end of the year, analysts expect a further recovery, as well as an increase in activity in terms of placements of yuan bonds.

According to Kommersant’s estimate, based on Cbonds data, in October corporate borrowers reduced the volume of placements on the domestic public debt market. During the month, they made 47 placements for 145 billion rubles. (excluding replacement bonds and private placement of SFO City Invest 6). This is more than double the September result and the worst since June.

According to Alexander Yermak, Chief Debt Markets Analyst of BC Region, 96.5 billion rubles fell to the share of ten transactions for the placement of bonds of the real sector, in addition, state corporations issued securities for 23.4 billion rubles, and issuers of the financial sector – for RUB 16.8 billion The largest was the issue of Rusal bonds denominated in yuan in the amount of 6 billion CNY (see Kommersant of October 24). “In October, 40 issues of investment and infrastructure bonds were placed for a total of 22.3 billion rubles,” says Alexander Yermak.

Passivity of issuers, according to market participants, was observed in the first half of the month and was associated with increased geopolitical risks (at the end of September, partial mobilization was announced in the Russian Federation, the completion of which was announced on October 31) and increased rates in the debt market. In the first two weeks, there were only two placements of companies in the real sector — Norilsk Nickel (25 billion rubles) and Segezha (10 billion rubles).

In early October, the yield of long OFZs was close to the maximum since the beginning of April, exceeding 10.5% per annum. “Market uncertainty has risen, which has widened credit spreads. Some issuers have postponed placements for an indefinite period,” notes Sovcombank analyst Arseniy Avtukhov.

Mostly in early October, bonds were issued by banks. Within two weeks, placements of almost three dozen issues of investment and structured bonds were completed, but the total amount did not exceed 5.5 billion rubles. The yield of such securities usually depends on the basket of underlying assets and certain events, and then does not depend on the level of rates in the market, which makes this instrument interesting for banks to place during periods of their growth, market participants note.

At the same time, despite the difficult market conditions, most issuers extended their pre-marketing until the situation improved, which happened in the second half of the month. By the end of October, the yield of long-term OFZs fell below the level of 10% per annum (see Kommersant of October 28).

“The absence of bad news in the current environment is already positive news. Therefore, initial placements resumed at the end of October,” says Denis Leonov, head of the debt capital markets department at BCS Global Markets.

The Ministry of Finance also took advantage of the rate cut. Last week, the ministry carried out the largest placement of OFZs in more than a year and a half in the amount of 178 billion rubles. (see Kommersant of October 27). In just a month, the Ministry of Finance attracted almost 228 billion rubles, the maximum result of this year.

Until the end of the year, activity in the primary market will recover, but analysts do not expect it to return to the values ​​of August-September, when issuers placed securities worth 390-460 billion rubles. “Corporate activity will increase in November and December, but uncertainty remains high,” notes Mr. Avtukhov.

First of all, experts talk about the possibility of issuing new yuan bonds. According to Denis Leonov, two issues are being pre-marketed at once: Segezha holding for CNY 1 billion and Yuzhuralzoloto for CNY 500 million. “Since mid-October, not a day has passed without the marketing of a bond issue in yuan,” the expert notes. Instruments denominated in yuan, Arseniy Avtukhov specifies, are bought by the country’s largest banks and funds, as well as wealthy Russians, but they are not yet available to many investors, perhaps due to the lack of appropriate liabilities.

Vitaly Gaidaev