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. Last Updated: 07/27/2016

Yields on New Federal Bonds Up Amid Efforts to Boost Demand

Annualized yields on the government's second issue of federal loan bonds grew to 162.38 percent at auction Wednesday compared to 94.07 percent at the previous sale, as analysts said the Finance Ministry tried to boost the attractiveness of the new security.


Federal loan bonds were launched last month as the first of a new package of financial instruments designed to divert money away from currency speculation and toward government debt.


But at Wednesday's primary auction, the government sold a mere 1.177 billion rubles ($259,000) worth of bonds out of a 3 trillion-ruble issue, as brokers remained indifferent to the securities, said Alexei Goncharov, chief specialist with the information department of Tserikh investment bank.


The average price of a bond dropped to 92.49 percent of its 1 million-ruble face value, compared to 97.12 percent at the previous auction.


Goncharov said the Finance Ministry cut prices to increase interest in the security, since federal loan bonds have had low turnover on the secondary market.


"One cannot play with the federal loan bonds for a long time, that's why few people want them," he said. Because the bonds' auction price is so close to their nominal price they are unattractive to brokers, he said.