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. Last Updated: 07/27/2016

3-Month Securities Launched

Russia's Central Bank has sold short-term securities on the commercial money market, the first step in a plan to raise 650 billion rubles ($818 million) this year.

The bank staged a trial auction at the Moscow Interbank Currency Exchange on Thursday where 10, 000 bonds with a face value of 100, 000 rubles ($126) each, repayable in three months, were sold at a set price of 85, 000 rubles apiece.

Regular auctions will start May 18. The bank hopes the securities can help finance the budget deficit and mop up surplus rubles in the economy.

So far, the government and the Central Bank have only been able to finance the budget deficit by printing rubles or emitting credits, which boosts inflation.

Dmitry Budakov, deputy head of the securities department of the Central Bank, said that the bonds would be attractive because of their high liquidity. Twenty-four banks and investment funds were allowed to take part in the first auctions, Budakov said.

At 85, 000 rubles, the bond offers a nominal profit of 17 percent over three months, about 87 percent annually. Budakov said he expected the bonds to sell for more than 85, 000 on the first real auction on May 18, bringing down the annual profit margin to about 80 percent - less than the 100 percent interest rate charged on Central Bank loans.

The Central Bank plans to raise about 650 billion rubles with these three-month bonds, Budakov said, adding that six-month bonds may be offered for sale in the future if trading is successful.