Russia to sell yuan-denominated bonds for first time amid growing budget deficit from war
Russia plans to issue its first yuan-denominated government bonds early next month in an attempt to cover this year's record budget deficit caused by the war in Ukraine.
This was reported by Bloomberg, according to Ukrinform.
A statement by the Russian Ministry of Finance published on Wednesday said that on December 2, the ministry will begin accepting bids from investors for two series of fixed-rate domestic bonds denominated in Chinese currency, with maturities ranging from three to seven years and a coupon period of 182 days. The nominal value of each bond will be 10,000 yuan.
The Russian government is seeking to increase borrowing amid increased military spending and falling oil revenues, as Russian oil prices decline and a new wave of US sanctions takes effect. The budget deficit is projected to reach a record 5.7 trillion rubles (USD 70.3 billion), or about 2.6% of gross domestic product.
The ministry had been considering selling government bonds, known as OFZs, in yuan even before international sanctions were imposed on Russia over its invasion of Ukraine. Companies have already sold debt obligations in that currency.
On Wednesday, the Ministry of Finance held its first auctions this year to sell floating-rate OFZs, selling 876 billion rubles worth of bonds maturing in 2039 and 815 billion rubles worth of bonds maturing in 2041. It also placed fixed-rate bonds worth about 165 billion rubles maturing in 2033.
The size of the yuan bond sale and coupon rates will be determined after the bid book process, and technical placement on the Moscow Exchange is scheduled for December 8, the ministry said. Investors will be able to purchase bonds and receive payments in both yuan and rubles. The sale will be organized by Gazprombank, Sberbank, and VTB Capital Trading.
“Interest in the sale should be high, as the Russian debt market is looking for alternatives to the dollar and the euro, and the yuan has become a key currency in foreign trade,” said Vladimir Chernov, an analyst at Freedom Finance Global.
As reported by Ukrinform, according to the General Administration of Customs of the PRC, China's trade with Russia continues to decline: in the first 10 months, it fell by 8.7% compared to the same period last year, to 1.3 trillion yuan (USD 184.7 billion).
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