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. Last Updated: 07/27/2016

Local Bidders Reap Rewards With 2% Premiums on T-Bills




Bidders at the treasury-bill auctions held by the Finance Ministry walked away with 2 percent premiums Wednesday, fueling speculation that the Central Bank may hasten the pace of ruble devaluation following foreigners lack of interest in long-term papers.


Traders said it was even more significant that an eight-month issue of GKOs, as Russian T-bills are known, at the second auction sold at an average weighted yield of 28.21 percent with maximum yield of 28.98 percent, compared to 26.35 yield on similar issue on the secondary market Tuesday.


"[At the auction], everybody put very aggressive bids," said Stanislav Lykov, a t-bill dealer at Alfa-Bank. "It was composed entirely of Russian participants."


He said foreigners ignored long-term papers due to unstable political conditions, but added that it could improve after the new government spells out its program.


Foreigners' nonparticipation at the auctions, however, was also due to a report in The Financial Times which quoted Central Bank chief Sergei Dubinin as saying that ruble devaluation will be brought in line with inflation.


Early this year, the Central Bank demonstrated its intention to keep the devaluation lower and intervened in the market to protect the ruble.


Analysts expect devaluation to be 5 percent to 6 percent with inflation 8 percent to 10 percent this year. Now, on expectations that devaluation will go along with inflation, the GKO yields may surge about 3 percent, a trader at a prominent Moscow brokerage said.


"[The yield on] one-year GKO may break through the refinancing rate level [of 30 percent] even tomorrow," he said.