Russia goes on bumper US$7.2b borrowing spree

Moscow

THE technocrats who run Vladimir Putin's Finance Ministry know well that the next geopolitical crisis could be just around the corner. This year, they're preparing early for potential turbulence, stockpiling cash while times are good.

The ministry borrowed more than US$7.2 billion so far in March through local-currency and Eurobond sales, almost four times the monthly average in 2018, capitalising on a recovery in demand among foreign investors. Finance Minister Anton Siluanov said on Friday that the huge amount raised gives the country room to start trimming sales in the local market.

Russia is running the widest budget surplus in a decade, so it doesn't actually need to sell bonds, but the bumper borrowing now could be a precautionary move against potential US sanctions later in the year. A bill under discussion in Congress proposes banning American investors from taking part in sales of Russian sovereign debt to punish Moscow for alleged election interference, among other things.

A move by the finance ministry to abandon the practice of giving targets before bond sales allowed it to take full advantage of a surge in appetite for emerging-market debt this year.

Foreign inflows into Russian bonds have been the main driver behind a roughly 9 per cent surge this year in the ruble, the biggest rally among major emerging-market currencies, central bank chief Elvira Nabiullina said on Friday.

Yields on Russian Eurobonds maturing in 2028 dropped below 4.6 per cent last week for the first time since July. In March, Russia sold US$3 billion in Eurobonds, its largest placement since before sanctions were first imposed in 2014.

The Finance Ministry was forced to halt bond sales through the whole of September as borrowing costs surged due to fears that sanctions were imminent. It turned out to be a false alarm. BLOOMBERG