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. Last Updated: 07/27/2016

$166 Million in T-Bills Sold

The Finance Ministry has sold nearly 300 billion rubles ($166.29 million) in three-month treasury bills at its largest-ever primary auction, and plans to issue about 9 trillion rubles in short-term debt this year, a top ministry official said.


Commercial banks oversubscribed the government's 12th monthly treasury-bill auction Tuesday by about 33 percent, placing 398.20 billion rubles in bids, 298.60 billion rubles of which were satisfied at an average annualized yield of 205.03 percent. At its 11th auction last month, the government sold 173.01 billion rubles in bills at an average annualized yield of 214.19 percent.


Bella Zlatkis, chief of the Finance Ministry's Department of Public Securities and Financial Markets, was audibly elated by the result in a telephone interview Tuesday.


"Nobody believed us," she said. "The Central Bank told me yesterday that bids would be no more than 250, maybe 270 billion rubles ... It shows that we estimated the market very well."


Zlatkis said that the Finance Ministry was entirly satisfied with the average yield the bills fetched. The government uses the bills as a non-inflationary source of funding for budgetary expenditures: The lower the yield, the less the government must pay to finance spending.


"We are, of course, pleased that the yield is much lower than the previous auction," she said.


Such large auctions would have been hard to imagine as recently as January, when the resignations of ex-finance minister Boris Fyodorov and former first deputy prime minister Yegor Gaidar dealt a blow to confidence in the market.


At its January auction, the Finance Ministry only managed to sell about 82 percent of a 120 billion ruble treasury-bill issue. Since then, however, the auctions have attracted growing demand.


Zlatkis said that this month's success would allow the Finance Ministry to increase its next auction to 350 or 400 billion rubles, in line with its plans to issue 8.981 trillion rubles in three- and six-month securities in 1994.


She said that a large jump in primary auction volume should come in September, when the Finance Ministry plans to expand the auctions nationwide.


Alexander Kukharyev of the Moscow Interbank Currency Exchange, where the auctions take place, attributed the high demand to a recent increase in the number of authorized dealers from 28 to 55, and to falling interest rates on the interbank credit market, where banks directly lend each other money.


Annualized three-month rates on the interbank credit market reached between 205 and 215 percent this week, down from 210-220 percent a month ago, according to Yevgeny Shtange, a securities expert at consultancy Skate-Press. He said a recent Moscow city decision to boost the profit tax for banks from 35 to 43 percent had also boosted demand for the government bills, which are tax free.