Russian MinFin expects to fulfill ambitious Q4 borrowing plan, ready for high share of floaters

MOSCOW. Oct 2 (Interfax) - The Russian Finance Ministry, which has fallen short of its borrowing plans for two consecutive quarters, has set a highly ambitious target, which it expects to fulfill, for the last three months of the year.

To do so, the ministry will need to keep the percentage of variable coupon bonds in total bond offerings high, but this will subsequently decrease, Deputy Finance Minister Vladimir Kolychev told reporters.

The MinFin sold 1.986 trillion rubles of OFZ or federal loan bonds - 60.2% of a planned 3.3 trillion rubles - in January-September. It sold 676.1 billion rubles or 45.1% of a planned 1.5 trillion rubles in Q3, 505.5 billion rubles or 50.6% of a planned 1 trillion rubles in Q2 and 804.55 billion rubles in Q1, slightly more than a planned 800 billion rubles.

"We have our annual program and we must fulfill it. We have already been selling floating rate bonds for several months [after a long pause in the use of this instrument, coveted by banks, at OFZ bond auctions]. We expect to borrow all [that we have planned]," Kolychev said.

But the MinFin will have to sell a lot of floaters. "Judging by how placements are going now, then yes, [the share of floaters in bond offerings] will probably be high," he said. If all existing floating rate bond issues are sold the ministry will issue new ones, he said.

In its polemics with major banks and others regarding the OFZ mix at auctions, the MinFin usually talks about the need to curb growth in the share of floaters in borrowings so as not to elevate the budget's interest rate risks. "We'll be reducing the share of floaters in the coming years," Kolychev said.

"Yes, I think [we'll be able to do this]. The current situation for interest rate risks is poor, and it will always be poor. We, as the borrower, have to adapt to the situation one way or another," he said.

The gradual increases in the borrowing program for the next three years is not a problem from the macroeconomic point of view, Kolychev said. "The borrowing program is modest [over the three years]. It is 1-1.5% of GDP and more or less stable. If we compare it with lending, it is something like 10%-20% of it. This is not a lot for the financial system," Kolyhev said.

The draft budget projects gross borrowing of 4.78 trillion rubles and net borrowing of 3.365 trillion rubles for 2025. Kolychev said the market situation would be better for the Finance Ministry next year.

"Different circumstances can arise on the market from year to year. It is hard to describe this year as favorable in terms of market conditions, which is why we have such results [at the present moment]. Nobody knows what the future will bring, but there will be some kind of normalization [in 2025]," he said.