MOSCOW (Reuters) – Russia will cut its 2021 borrowing plan more than expected and will offer only new OFZ treasury bonds from June 14, the date after which U.S. banks will be barred from buying rouble-denominated state bonds directly from Russia.
The new set of sanctions announced on Thursday battered the rouble and state bonds but analysts say it will not have a significantly adverse impact on the Russian budget and markets over the longer term.
The United States imposed a broad array of anti-Russian sanctions, including on purchases of Russian debt, to punish Moscow for alleged interference in U.S. elections, cyber-hacking and other “malign” acts.
Commenting on the U.S. move, which sent ripples across Russian markets, Finance Minister Anton Siluanov said the new sanctions meant missed opportunities for U.S. banks, adding he expected demand for Russia’s state debt to remain high.
Siluanov said Russia will study market conditions carefully when deciding whether to offer OFZ in the coming weeks, suggesting the ministry may cancel some of its weekly auctions.
After the sanctions, the finance ministry said it decided to cut this year’s borrowing plan by 875 billion roubles ($11.45 billion) versus its earlier plan to trim the borrowing plan by up to 700 billion roubles. It had initially planned to borrow 3.7 trillion roubles in OFZ bonds in 2021.
In order to avoid the risk of forced selling of its state bonds by foreign investors, the finance ministry said it would offer only new OFZ series after June 14 and would stop offering top-up OFZ series that were registered before that date.
The share of foreign banks, pension funds and international asset managers among OFZ bond holders has been on the decline for months.
By late March, foreigners’ share among OFZ holders slumped to 20.2%, its lowest level since August 2015.
Markets have long prepared for such a moderately tough decision in which the only market-sensitive thing targeted is the buying of OFZs directly from the finance ministry but not from other banks on the secondary market, said Dmitry Dolgin, chief economist with ING Russia.
“But the negative thing is no one can guarantee that this will all stop here,” Dolgin said.
Russia’s state-run lenders Sberbank and VTB have vouched to replace foreign investors if needed and help the finance ministry place OFZ bonds used to plug budget holes.
U.S. investors hold around 7% of OFZs, or less than 1 trillion roubles, according to the central bank. This compares with over 4 trillion roubles in OFZs held by Sberbank and VTB.
($1 = 76.40 roubles)
(Reporting by Andrey Ostroukh and Katya Golubkova in Moscow; Additional reporting by Elena Fabrichnya, Darya Korsunskaya, Alexander Marrow, Vladimir Abramov and Tatiana Voronova in Moscow, and by Tom Arnold and Sujata Rao in London; Writing by Andrey Ostroukh; Editing by Gareth Jones and Matthew Lewis)