4 Dec 2017 09:54

Project to issue Russian OFZ bonds in yuan in final stage - CBR

MOSCOW. Dec 4 (Interfax) - The project to issue OFZ federal bonds denominated in yuan is in its final stage, the infrastructure is ready and now the matter is up to the Finance Ministry, the director of the financial markets development department at the Central Bank of Russia (CBR), Yelena Chaikovskaya said.

"The project to place OFZ in yuan is now in its final phase. We think that this will be the pilot project that will help us test infrastructure, after which there might already be corporate borrowing in yuan," Chaikovskaya said at the Vedomosti financial forum.

Speaking to reporters later, she said that the Finance Ministry will make the decision on the timing of the bond offering.

"A surprise could happen any day. But this is the Finance Ministry's decision. Everything that depended on us, the technology infrastructure, licenses for subsidiaries of Chinese banks, all of the infrastructure has been set up and is ready even tomorrow, the day after tomorrow. When exactly to come out is the commercial decision of the Finance Ministry," Chaikovskaya said when asked about the possible timing of the offering.

The Chinese regulator's position on how Chinese investors' participation in buying these bonds will influence capital outflow is also important. A road show is being held in order to once again confirm the "permission and will of Chinese regulators for their investors to buy these bonds," Chaikovskaya said.

"According to our information, knock on wood, everything is going alright so far. The agreements that were reached a year ago and stipulated in protocols, including of the intergovernmental commission, that the Chinese side is confirming and welcoming the placement of government bonds in Chinese yuan so that mainland investors acquire them, these agreements are being affirmed in the course of the non-deal road show," Chaikovskaya said.

The political will in China regarding this issue is not formalized, which is "both a plus and a minus," she said. "If they realize that something benefits them, they allow pilot projects without instructions, to beat a path and then they pave it with instructions. This is the regulatory sandbox that we're going into," Chaikovskaya said.

Asked about Euroclear's participation in the placement of yuan OFZ, she said "it is expected that the bonds will be Euroclearable - it was exactly the same with an issue of Russian Eurobonds, when the global certificate couldn't be deposited in Euroclear and it was placed in the National Settlement Depository (NSD), and then accounts were opened in Euroclear."

"Here the situation will be the same: the global certificate will be in the NSD, Euroclear can open an account in the NSD and then other clients can go through Euroclear," Chaikovskaya said.

Reports citing sources that there might soon be an offering of OFZ bonds emerged on Thursday following a meeting between Russian Finance Ministry officials and investors in Hong Kong. Western media reported that Russia has engaged Bank of China, ICBC and Gazprombank to organize events with investors and sell the bonds, and that the offering could take place before the end of the year and even as early as next week.

A source familiar with the situation told Interfax that Russia's Finance Ministry is indeed now preparing an issue of yuan OFZ. The source could not specify the timing of the offering, but said it might happen in December. Another source said that the offering could take place in the next two week.

The Finance Ministry declined to comment on these reports.

The offering will total CNY6 billion, or the equivalent of almost $1 billion, as previously planned.