The ministry said in a statement that the placement did not take place due to the absence of bids at acceptable price levels. Analysts at T-Investments reacted with the phrase: “No one came to the OFZ auction”.
The failure was the first for the Finance Ministry since July, when it already had to suspend government debt sales because of a market decline. Last week, the ministry placed two OFZ issues for 150 billion rubles, and a week earlier — for 139.6 billion rubles.
Analysts at Raiffeisenbank linked the pressure on the market to “fairly substantial changes in budget plans for this year and the next”. According to Reuters, the British agency, next year the authorities will increase military spending by about a third — to 17.1 trillion rubles, and together with spending on other security agencies it will exceed 40% of the budget.
The Finance Ministry raised the budget deficit forecast for the current year to a record 7.3 trillion rubles from the previous 3.6 trillion rubles and plans to borrow an additional 1 trillion rubles to cover it. Next year, the ministry intends to sell bonds worth 7.7 trillion rubles to close the deficit and pay for expenses.
Raiffeisenbank also noted that the OFZ price index on the Moscow Exchange fell back to 111.2 points, and the yields on long-term government bonds approached 17% per year. Economist Vladislav Inozemtsev called the scheme in which the Finance Ministry sells floaters to banks for nearly 1 trillion rubles, and then credit institutions borrow a comparable amount from the Central Bank and hand over the securities to it as collateral, a “coordinated game” and a “purest emission operation”.
Analysts at Vector Capital believe that if the next two or three auctions fail again, the Finance Ministry will likely have to return to this practice.
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