MOSCOW: The Russian finance ministry successfully returned to the domestic treasury bond market on Wednesday after a hiatus caused by Moscow's confrontation with Ukraine, selling all its offering and meeting less than half the demand.
The finance ministry has been forced to call off most of its weekly auctions since Russia annexed Ukraine's Crimea and allegedly backed separatist rebels in eastern Ukraine, as investors rushed to ditch rouble assets.
The ministry had said on Tuesday it would cut its domestic borrowing plans significantly this year.
It planned to use the results of this week's auction as an indicator of market sentiment towards its debt in the absence of political risks. Despite bloodshed in eastern Ukraine, Moscow markets have shown this week that investors appear to believe the tensions are easing.
Russia's ratio of public debt to gross domestic product is around 11 percent - much lower than the ratio for many developed countries, such as Italy or Japan. It is under no pressure to borrow cash from the market.
"The domestic borrowing program will be adjusted depending on the dynamics of budget revenues," Deputy Finance Minister Sergei Storchak told reporters on Tuesday. Volume will be cut "significantly," he said, and the government will not borrow on foreign markets.
"We have a beneficial (for the federal budget) rouble exchange rate, prices for Russian export goods are good - all this gives hope that we may see a budget surplus or a balanced budget this year, which will allow us to slow the rate of raising public debt."
The rouble is now down around 5 percent against the dollar . It fell as much as 10 percent in early March when Russia declared its right to interfere in Ukraine's events. That means the ministry has extra cash that it had not counted on.
About 50 percent of Russia's budget revenue comes from the oil and gas industry, and export duties on those products are calculated in dollars. Crude prices, oscillating so far this year around $108-$110 per barrel, have remained nearly $10 above the expectations in the budget at the beginning of the year.
RETURN OF NON-RESIDENTS
The news most likely to please the finance ministry is that many buyers at Wednesday's auction were non-Russian, indicating demand for the country's assets is reviving.
The ministry sold its full offering of 10 million roubles ($287 million), less than half the 23 billion roubles of demand.
"Demand from non-residents has been present throughout the week," said "There is a feeling that buyers have returned to the market.
The finance ministry has brought some balance - it's great that this auction had taken place." The ministry placed its bonds at historically high yields for 10-year debt, 8.94 percent. But that provided no premium to the market - the bonds had traded at 8.98 percent in the previous session.
Wednesday's auction brings the ministry's total sale to around 155 billion roubles.
Of that, 55 billion roubles were sold via the open market, 100 billion through closed-market transactions, mainly to the state development bank VEB.
The 2014 plan so far envisages 808 billion roubles in borrowing, but Storchak said the new, trimmed forecast will become public soon.
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