Financial dependence on China: Russia to issue government bonds in yuan
3 November 09:47
Russia plans to issue government bonds denominated in Chinese yuan on the domestic market for the first time. This was reported by sources of the Reuters agency, "Komersant Ukrainian" informs
Up to 400 billion rubles in yuan
According to three financial market sources, the Russian Ministry of Finance is planning to hold up to four bond issues totaling up to 400 billion rubles (approximately 5 billion US dollars). The maturity of the securities will range from three to ten years.
“The deal is scheduled for early December. The Ministry of Finance is targeting a wide range of investors, from banks and management companies to brokers working with retail clients,” one source told Reuters.
Another source said that the Ministry of Finance has already held meetings with potential buyers, including banks and institutional investors, who were presented with the main parameters of the future “yuan” bonds.
Transactions with these securities can also be carried out in Russian rubles at the current RMB exchange rate.
Sanctions and RMB surplus
The issue is being prepared as two major Russian oil companies, Rosneft and Lukoil, which have been sanctioned by the United States, return their yuan revenues to Russia before November 21, when the sanctions come into effect.
According to estimates by the Cbonds analytical agency, there are currently corporate bonds denominated in yuan on the Russian market with a total value of about 166 billion rubles.
In May, Russian Finance Minister Anton Siluanov said that 90% of trade between Russia and China is carried out in rubles and yuan, although he did not specify the share of yuan. Last year, bilateral trade reached a record $245 billion.
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Where the bonds will be placed
The new bonds are to be placed on the Moscow Exchange (MOEX), which is under Western sanctions. This will make the securities inaccessible to most foreign investors, including those from China and other Asian countries.
Russia is negotiating with China to create a “bridge” between the financial markets of the two countries, which would allow Chinese investors to access Russian assets without being monitored by Western regulators.
The talks have so far yielded no results, despite the strong political ties between Russia and China and the “policy of partnership without upper limits” proclaimed by President Vladimir Putin and Chinese President Xi Jinping.
Experts’ expectations
One of the representatives of the Russian Ministry of Finance confirmed to the agency that the preparation of the issue is “in progress” and the official announcement will take place in the near future.
Analysts expect strong demand for RMB bonds from Russian exporters, especially energy companies, which currently keep their foreign currency earnings in bank deposits. This has resulted in historically low rates on RMB deposits within the country.
Renaissance Capital believes that the placement of such securities will help reduce currency risks for Russian banks that have accumulated excess RMB liquidity, and will also help meet regulatory requirements in the financial sector.
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