The Ministry of Finance reacted to the debts reloaded – Newspaper Kommersant No. 238 (7439) dated 12/22/2022

On the last day of the auction, the Ministry of Finance overfulfilled its annual plan for borrowing. At the end of the year, the ministry placed OFZs for 3.28 trillion rubles, which is a quarter higher than the volume of borrowings at the end of 2021. This became possible due to aggressive demand from banks, which attracted liquidity from the Central Bank. At the same time, in 2023, the Ministry of Finance may reduce the amount of borrowing, but it will also aim to attract funds from banks.

On the last auction day of the outgoing year, the Ministry of Finance maintained high volumes of borrowings in the government bond market. The total demand following the results of three OFZ auctions exceeded 610 trillion rubles, and the volume of placement reached 337 billion rubles. This is only 4% lower than the amount raised a week earlier and the fourth result this year. At the same time, the attraction went against the background of higher rates in the debt market. “After the meeting of the Board of Directors of the Bank of Russia held on Friday, OFZ yields increased by an average of 16 bp. p., while short-term and medium-term securities increased by 15–50 bp. p., for long-term – 12–16 bp. up to 10.23–10.3% per annum,” notes Alexander Yermak, Chief Analyst of the Fixed Income Markets of BC Region.

For the fourth quarter, the volume of placement of government bonds amounted to 3.14 trillion rubles, and in general for the year – 3.28 trillion rubles. Thus, the department exceeded the initial borrowing plan for 2022 in the amount of 3.26 trillion rubles.

This became possible thanks to the placement of OFZs with a floating rate (floaters) for 2.5 trillion rubles, the active buyers of which were Russian banks. According to the Central Bank, in the previous month they purchased over 90% of all OFZs. “In December, the picture remained the same, banks bought out about 90% of all OFZ placements,” Mikhail Vasilyev, chief analyst at Sovcombank, estimates. “It is important for banks to minimize the interest rate risk that arises when long assets are funded by short liabilities,” notes Alexander Shurakov, a leading debt market analyst at Otkritie Investments.

To finance such investments, banks actively used the tools provided by the Central Bank and the Ministry of Finance. According to the Bank of Russia, in November, credit institutions increased borrowings from the regulator by 0.5 trillion rubles, including those secured by purchased OFZs. In December, monthly repo limits were reduced to 1 trillion rubles. against the limit of 1.39 trillion rubles. In November. The decrease in the repo limit, according to Alexander Shurakov, can be explained by the growing importance of treasury deposits as a funding tool for the acquisition of new issues by banks, as well as reinvestment in new issues of funds from redeemed OFZs.

Analysts believe that only part of the funds raised by the Ministry of Finance went to finance this year’s budget deficit. According to the agency, the deficit will amount to 2.9 trillion rubles. and will be partly financed by the NWF and partly by OFZ. “0.7-1.4 trillion rubles can go to cover the budget deficit in 2023. of the funds raised this year through the OFZ,” estimates Mikhail Vasiliev. In his opinion, with a forecasted budget deficit of 2023 of 2.9 trillion rubles. attraction at the expense of OFZs can amount to 2.5-3.5 trillion rubles. “In the context of a likely global recession and a likely decline in commodity prices, risks are shifted towards a larger increase in the budget deficit, so the Ministry of Finance will continue to actively borrow in the debt market as long as market conditions allow,” Mr. Vasiliev believes.

During 2023, as in 2022, the Ministry of Finance will focus on the placement of floaters, since in the absence of non-residents, only Russian banks remained major market participants. According to Alexander Shurakov, at the beginning of the year, if the Treasury maintains significant cash balances, the importance of this instrument for funding investments in new OFZ issues will grow.

At the same time, there is no need to expect a significant improvement in the conditions for borrowing, even despite analysts’ expectations for a reduction in the key rate of the Central Bank in the first half of next year.

“In 2023, increased uncertainty in the debt market will continue due to the likely global recession and geopolitics. Therefore, rates in the first half of the year are likely to remain close to current levels,” Mikhail Vasilyev believes.

Vitaly Gaidaev