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. Last Updated: 07/27/2016

Brokerage Gets Rights To T-Bills


Merrill Lynch will become the first Western investment bank to gain direct access to the Russian treasury bill market, having won the mandate for a $500 million placement in one-year papers, London banking sources said.

The issue will consist of two six-month T-bills to be sold at regular auction March 27, Reuters reported. "This is the first time non-residents can buy GKOs outright," one source said, adding that it had been given approval of both the Central Bank and Finance Ministry.

It was the latest sign of Moscow's efforts to open government securities to foreigners and lower its borrowing costs.

Currently, foreigners can only purchase T-bills offshore through one of two former Soviet banking institutions. The yield will be set at 19 percent under rules governing foreign purchase of T-bills at a guaranteed ruble-dollar swap.

At Wednesday's auction, nonresidents bought $60 million worth of six-month GKOs, Reuters said.

On the domestic market, the auction saw average annualized yields on three-month paper jump nearly 30 percent, continuing a recent upward trend after yields had fallen consistently earlier this year.

Yields were 90.56 percent at Wednesday's auction, up from 61 percent at the previous auction March 6. Dealers oversubscribed the 6 trillion ruble issue, and the Finance Ministry placed 5.989 trillion rubles ($1.2 billion) worth of GKOs.

Yields also leaped on six-month GKOs, rising to 115.13 percent from 90.57 percent at a March 13 auction. The Finance Ministry placed 4.999 trillion rubles of the 5 trillion ruble issue, which was oversubscribed by more than 2 trillion rubles.

The upswing is likely a sign of the government's cash flow concerns, one trader said. "It simply indicates the need for funding which currently exists," said Vladimir Merson, head of fixed income at CS First Boston. "The government is issuing a lot of securities, trying to sell as much as it can." ()