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. Last Updated: 07/27/2016

New System Sees Rise in T-Bill Prices

Prices of Russian treasury bills rose slightly in Thursday's secondary trading, the first day of a new trading regime involving 42 large banks, or primary dealers.


Traders expressed some surprise that prices stayed high following Wednesday's auction, given that liquidity was expected to drop off sharply with the implementation of the new rules, which were announced last summer by the Moscow Interbank Currency Exchange, or MICEX.


"Today, there was substantial surge in the amount of money, and that was a signal to buy. By the end of trading, what had been very widespread narrowed substantially," and trading volumes reached about 5 trillion rubles ($917 million), said a fixed income trader with Renaissance Capital.


Yields on the longest paper closed at 57.45 percent Thursday, a bit lower than in secondary trading Tuesday, but still close to the 60 percent Central Bank refinance rate.


In Wednesday's auction, yields on government treasury bills, or GKOs, climbed to 58.46 percent from 56 percent in the previous week's auction.


Traders said the market was somewhat in disarray because of the new MICEX trading system and uncertainty about President Boris Yeltsin's heart-bypass operation tentatively scheduled for next week.


Prices stayed up, one trader said, "since there was new money in the market, and the Central Bank was heavily involved."


He said the government is continuing to rely on T-bills for financing of the budget deficit because tax collection levels are low and the International Monetary Fund has delayed its latest monthly payment on Russia's $10-billion, three-year loan.


"The market was definitely influenced by the Central Bank, which is trying very hard to prevent a spike in yields," said Robert Devane, head of fixed-income investments at Troika-Dialog.


But traders also said the market players' confidence may have been buoyed by Finance Ministry representative Bella Zlatkis' statement late Thursday that in two to three years, foreigners could trade within the T-bill market on the same terms as Russians.


About 4 trillion in ruble reserves were deposited Tuesday with the MICEX, up from 1.2 trillion last week, which signaled healthy demand ahead of Wednesday's auction, dealers said.


Separately, prices of Finance Ministry bonds fell in thin trading, as the market awaited news about another $57 million in face value of so-called "frozen" MinFins.