Russia Joins Global Borrowing Boom With Record Bond Sale

(Bloomberg) -- Russia sold the most debt on record in its weekly bond auctions, benefiting from historically low borrowing costs to fund stimulus plans.

The Finance Ministry placed 112 billion rubles ($1.6 billion) of bonds due in October 2027 at its first auction on Wednesday -- the most ever for a single offering. Bids reached 149 billion rubles as the prospect of deeper interest-rate cuts bolstered demand, while local banks may have bought the debt to use as collateral in long-term repo auctions with the central bank.

Russia is joining governments around the world in ramping up debt sales to fund coronavirus stimulus plans. With one of the lowest debt loads globally, the country has plenty of room to increase borrowing, while a recovery in crude prices has helped boost demand.

The Finance Ministry also sold 46.8 billion rubles of March 2039 notes and 10.8 billion rubles of inflation-linked bonds.

The prospect of rate cuts make Russian bonds more attractive, according to Cristian Maggio the head of emerging-market research at TD Securities in London. “If yields go lower, that’s a good investment.”

Yields on 10-year Russian government bonds traded at 5.44% on Wednesday, the lowest since records began in 2007. The ruble is at the highest level versus the dollar in two months, supported in part by inflows to the bond market.

The central bank cut interest rates by 50 basis points to 5.5% last month and has hinted at a possible percentage point of easing in June. Economists at Citibank in Moscow said last week that Russia could cut interest rates to as low as 3%.

©2020 Bloomberg L.P.