Last Tuesday, the State Duma approved an amendment to the draft federal budget for 2023 and the planning period of 2024 and 2025, which gives the government the right to conduct exchange of Eurobonds for new federal loan bonds (OFZ) with a nominal value of up to RUB 800bn during next fiscal year (i.e. 2023). It is envisaged that government securities denominated in foreign currency can be exchanged only for Russian securities denominated in Russian roubles, with equal or longer maturities. Eurobonds will be exchanged at their market value, determined by the government, and in agreement with their owners.

 

Russian Government Bonds

Last Tuesday, the State Duma approved an amendment to the draft federal budget for 2023 and the planning period of 2024 and 2025, which gives the government the right to conduct exchange of Eurobonds for new federal loan bonds (OFZ) with a nominal value of up to RUB 800bn during next fiscal year (i.e. 2023). It is envisaged that government securities denominated in foreign currency can be exchanged only for Russian securities denominated in Russian roubles, with equal or longer maturities. Eurobonds will be exchanged at their market value, determined by the government, and in agreement with their owners. Separately, the amendment stipulates that the Bank of Russia has the right to receive government securities denominated in roubles when they are initially placed as part of the exchange of currency Eurobonds owned by the Central Bank. One of the main factors the government was considering for the 2023 federal budget is the volume of external debt (i.e. currency risk, especially given that the rouble is expected to weaken in the not so distant future) versus the cost of borrowing (given that yields on outstanding sovereign Eurobonds are generally lower than on local OFZs). Thus, depending on the configuration, the exchange will lead either to an increase in the cost of servicing the national debt in the long term, or to an increase in the public debt itself. According to the Ministry of Finance, as of 1st October, the total debt on Eurobonds of the Russian Federation amounted to about USD 35.7bn. At present, the Ministry of Finance makes all payments on foreign currency Eurobonds of the Russian Federation in roubles. The latest payments were released last week for Eurobonds with maturity in 2027 and 2032, when the Ministry of Finance transferred RUB 2.3bn to NSD acting as new paying agent for these programs.   Issuer Ticker Bid Ask XS0971721963 RUSSIA 5⅞  43 53 57 XS0767473852 RUSSIA 5⅝  42 53 57 RU000A0JXU14 RUSSIA 5¼  47 32 37 RU000A1006S9 RUSSIA 5.1  35 34 39 XS0971721450 RUSSIA 4⅞  23 70 75 RU000A0ZYYN4 RUSSIA 4⅜  29 36 39 RU000A0JWHA4 RUSSIA 4¾  26 37 40 RU000A0JXTS9 RUSSIA 4¼  27 38 41 RU000A0ZZVE6 RUSSIA 2⅞  25 38 41 RU000A1034K8 RUSSIA 2.65 36 32 37 RU000A102CK5 RUSSIA 1⅛  27 32 37 XS0088543193 RUSSIA 12¾ 28 70 75 RU000A102CL3 RUSSIA 1.85 32 31 34 XS0114288789 RUSSIA 7½  30 38 42 RU000A0JWM07 RFLB   7¾  26 Call desk for prices RU000A0JS3W6 RFLB   8.15 27 Call desk for prices RU000A0ZYUB7 RFLB   7¼  34 Call desk for prices RU000A0ZZYW2 RFLB   7.95 26 Call desk for prices RU000A0JXFM1 RFLB   7.7  33 Call desk for prices RU000A100A82 RFLB   7.65 30 Call desk for prices RU000A0JXB41 RFLB   7.4  22 Call desk for prices RU000A0JXQF2 RFLB   7.1  24 Call desk for prices RU000A0JTK38 RFLB   7.05 28 Call desk for prices RU000A0JU4L3 RFLB   7    23 Call desk for prices RU000A0ZYU88 RFLB   6½  24 Call desk for prices RU000A103901 RFLB   6.9  31 Call desk for prices RU000A0ZYUA9 RFLB   6.9  29 Call desk for prices RU000A1014N4 RFLB   6    27 Call desk for prices RU000A101QE0 RFLB   4½  25 Call desk for prices   * Indicative price for positions with institutional size only. For smaller sizes please call desk