Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

T-Bill, Bond Auctions Court Stability

Treasury bill yields remained stable at Wednesday's auction after the government placed just half the paper traders expected in a likely attempt to stabilize falling prices, analysts said.


Despite the government's success last year in reining in high yields on T-bills, borrowing money has become increasingly expensive in recent weeks, with secondary market yields pressing up from 30 percent on March 14 to 35.2 percent Monday.


Prior to the auction, some analysts speculated that the Finance Ministry's plans to sell 10 trillion rubles of eight-month T-bills, also known as GKOs, revealed a dire need for cash to clear mounting wage and pension arrears ahead of Thursday's nation-wide strike.


But traders said only 5.4 trillion rubles were sold at the primary auction. Average yields were 36.5 percent, 0.76 percent more than similar paper traded at last week's primary auction and 1.3 percent higher than yields of 35.2 percent on Tuesday's secondary market.


The government also auctioned 1.9 trillion rubles in OFZ government bonds at yields of 42.45 percent. It had been expected to auction 5 trillion rubles in OFZs.


Wednesday's total auction of 7.3 trillion rubles of government paper was just enough to cover 6.3 trillion rubles worth of maturing GKOs which the Central Bank had to pay. The government had announced Tuesday its intent to scale back the size of the issue, Reuters reported.


"The Ministry of Finance was not as desperate to dump as much paper on the market as it could have," said Robert Devane, head of fixed income at Troika Dialog. "The Ministry of Finance and the Central Bank were more interested in maintaining a stable yield level than taking the most it could off the market."


But analysts speculated the remaining bills would be sold on the secondary market soon. "They will try to dump the rest of the paper on the secondary tomorrow," said Gleb Shestakov, president of Global Fund Management. Although he predicted growth on Thursday's market, Shestakov said overall prices would remain relatively stable in the near term.


The GKO market was not affected by the U.S. Federal Reserve's quarter-percent hike in interest rates Tuesday, traders said.


Yields on GKOs topped more than 200 percent on the eve of last year's presidential election, but have since come down under tight government control. Analysts predicted that the Ministry of Finance would not risk higher yields, despite low tax collection and pressures to pay off wage arrears.


"I don't see them trying to flood the market now when yields have backed up," said Al Breach, an economist with the Russian-European Center for Economic Policy. He said Russia's recent Eurobond offering could provide the government with the extra cash it needs to deal with the shortage of funds.