Russian finance ministry plans to resume OFZ bond auctions in September

This content was produced in Russia where the law restricts coverage of Russian military operations in Ukraine

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MOSCOW, July 21 (Reuters) – The Russian finance ministry will resume domestic borrowing via OFZ treasury bonds in September and plans to boost borrowing in 2023 as inflation and the central bank’s key rate decline, Interfax quoted deputy finance minister as saying on Thursday.

Russia suspended borrowing via OFZ bonds, which it uses to plug budget holes, in February amid increased market volatility weeks before it started what it calls a “special military operation” in Ukraine, triggering sweeping Western sanctions.

Deputy Finance Minister Timur Maksimov said his ministry was planning to offer at the first stage a limited amount of OFZ bonds, up to 30 billion roubles ($543 million) at a time, but the decision will be made after consultations with investors.

“In any case, we will have to start doing something this year, because next year there will be increased volumes (of borrowing),” Interfax quoted Maksimov as saying.

OFZ bonds used to be popular among foreign investors who owned 17.8% of papers in circulation worth 15.61 trillion roubles as of March 1, days after Moscow dispatched thousands of troops to Ukraine on Feb. 24.

Non-residents from designated “unfriendly countries” that sanctioned Russia are now effectively stuck with their holdings of Russian stocks and bonds. Russia’s largest lenders, such as Sberbank and VTB, are seen as the main buyers of state debt.

The Russian government has also approved investing up to a half of its rainy-day National Wealth Fund (NWF), which stood at $210.6 billion as of July 1, in OFZ bonds months after foreigners stopped buying high-yielding papers.

“We should in principle start testing the market in a new environment for possibilities as after February the market is split into two segments, essentially left with a national outline. We need to understand how much, at what levels the market is ready to take (OFZs),” Interfax quoted Maksimov as saying.

($1 = 55.2500 roubles)

(Reporting by Reuters; Editing by Jonathan Oatis)

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