10 Sep 2009 12:44

Minfin should place 10-yr OFZ issue

MOSCOW. Sept 10 (Interfax) - The Russian Finance Ministry should make use of the current high demand and place an issue of 10-year federal loan bonds (OFZ), which would allow borrowers to push back the horizon on their borrowing to five-seven years, Troika Dialog analyst Alexander Ovchinnikov said.

The opportunity to use state securities from the Central Bank as security at par, regardless of the maturity date, has prompted considerable interest in "long" issues, Troika Dialog said in a note to investors.

However, there is a concern that if the Central Bank does not immediately change the scheme for refinancing using state securities as collateral, the OFZ yield curve will flatten out and yields in real terms, as in pre-crisis times, will be deep in negative territory and cease to be an essential interest rate benchmark for corporate borrowers, the note says.

The Central Bank could introduce a system of progressive discounts on the longest securities so that the effective yields of the assets is comparable to market rates, it says.