Autumn marathon: investors bought up Russian government debt
The Ministry of Finance has placed federal loan bonds (OFZ) worth 1 trillion rubles for the first time after a one—and-a-half-month break. Investors were offered variable coupon securities maturing in July 2042. The demand at the auction exceeded 1.4 trillion rubles. Izvestia found out what successful placement of Russian debt means, whether the surge in demand for OFZs is stable and whether it will help finance the budget deficit.
Record result
The Ministry of Finance has proposed one issue of federal loan bonds with a variable coupon (OFZ-PCs, floaters) of the 29031 series, maturing in July 2042. The demand amounted to 1.4 trillion rubles, and the placed volume of issue was 1 trillion rubles at face value. Thus, the issue was posted in full.
The cut—off price was 92.5% of the nominal value, the weighted average price was 92.5122% of the nominal value. The budget managed to attract 938.872 billion rubles. The result is a record for one auction in the last two years.
The Ministry of Finance last held auctions of OFZ in the first half of July, but then took a break due to high volatility in the debt market and "in order to help stabilize the market situation."
— Auctions were not held in the summer, as the market demanded too high yields and the agency did not want to fix expensive loans. The current success with an excess demand of 1.4 trillion rubles shows that at current rates and the right type of securities, interest has returned," says Olga Gogaladze, economist and financial expert.
Main buyers
The Ministry of Finance does not disclose the structure of bids at the auction in detail. As analysts suggest, the main demand for such a volume of placement is expected to be formed by large Russian banks, management companies, non-governmental pension funds (NPFs) and state financial institutions.
Banks are now particularly interested in such securities: they allow placing excess liquidity in a sovereign asset without much risk of interest rate changes. Therefore, it was local institutional players who formed the basis of demand, and not retail or foreign capital, explains Evgeny Shatov, partner at Capital Lab.
The test was passed
The current successful placement, in fact, has become an important test for the demand for Russian government debt — and the Ministry of Finance has successfully passed it.
In addition, as experts emphasize, in the current situation of uncertainty around the key rate, the Ministry of Finance chose quite the right tool: it offered investors not the usual fixed issue (OFZ-PD), but floating coupon bonds.
If it were only fixed income securities, the demand would be noticeably lower.
— The buyer of the floater does not assume interest rate risk: if the rate remains high or increases, the coupon will grow with it. With expectations of maintaining the key rate at 14% and a firm signal from the Central Bank on the eve of the September 11 meeting, this is exactly the tool that the market is ready to take," said Yan Pinchuk, deputy head of WhiteBird's stock trading department.
Such securities automatically adjust the profitability to the current value of money in the economy, so the investor is not afraid of further tightening of the Central Bank's policy. This is a pragmatic choice of a tool with minimal interest rate risk, adds Olga Gogaladze.
At the same time, taking into account the increased interest in the auction, experts suggest that the market could "digest" a larger volume — by 1.5–2 trillion rubles. However, here the Ministry of Finance would have to concede in profitability and give an additional premium in price.
How much longer
By the end of the year, the Ministry of Finance needs to raise about 2 trillion rubles more. The plan seems quite realistic. After the September auction, the Ministry of Finance fulfilled approximately 67% of the annual plan: it attracted 3.71 trillion rubles out of the planned 5.51 trillion gross borrowings.
If the demand for floaters persists and the fixed OFZ market stabilizes, the remaining amount can be distributed for September–December without the need for another "giant" trillion-dollar auction, Evgeny Shatov believes.
At the same time, according to analysts, it is advisable to focus on floating coupon securities.
On average, it is necessary to allocate about 500 billion rubles per month, which, with current demand, looks feasible if market conditions do not noticeably worsen, Olga Gogaladze notes.
Finance the deficit
The federal budget deficit in 2026, according to various estimates, may amount to 5-7 trillion rubles. Obviously, the September trillion-dollar placement covers only part of the demand.
Nevertheless, analysts consider this auction to be an important step towards restoring the channel of financing the budget deficit through the sale of OFZs.
But in order to sustainably close the deficit, it is necessary that demand returns to fixed-coupon securities.
OFZ-PCs, which investors are currently buying, have a short duration. Their coupon is linked to the RUONIA rate (market indicative rate) and recalculated every six months. In fact, this is an analogue of a bank deposit or promissory note: the investor gives money for one or two years, and then renegotiates the deal.
Since the money is raised at a floating rate, the cost of debt servicing remains high and depends on the dynamics of the key interest rate. That is, it is short and expensive money.
OFZ-PD is long and cheaper money. Their coupon is fixed for 10-20 years ahead. If demand returns to fixed income bonds, it means that the Ministry of Finance can borrow money today at the current rate for the entire maturity (for example, until 2042). This makes the budget predictable and reduces the risks of debt refinancing.
For now, investors are avoiding OFZ-PD based on expectations that the key rate will remain for a long time or even rise. In such a situation, a fixed coupon is less attractive: if the rate rises, the market value of these bonds will fall, and the investor will incur losses.
So for now, the market is waiting for two key conditions: a steady decline in inflation and a clear signal of a further rate cut.
In July 2026, the Bank of Russia raised its inflation forecast for 2026 to 6-7%. The regulator expects that, taking into account the current monetary policy, inflation will return to the target of 4% as early as 2027. The forecast of the Ministry of Economic Development for inflation in Russia by the end of 2026 is up to 5.2%. The ministry also expects that the target level will be reached in 2027.
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