Russia could offer yuan government bonds within 2 years, lobby group says


* Russia prepares to offer OFZ yuan bonds – NFA chief

* US investors always buy OFZ on the secondary market -NFA

MOSCOW, June 8 (Reuters) – Russia could issue OFZ government bonds denominated in Chinese yuan within two years, the head of the Russian financial markets lobby group said.

Moscow first pitched the idea in 2016, but the plan was postponed due to growing risks of Western sanctions against Russia, despite numerous rounds of talks with Beijing.

These risks have since materialized, with US banks not allowed to buy OFZ ruble-denominated bonds directly from Russia from mid-June, after being barred from directly buying Eurobonds in 2019.

Vasily Zablotsky, president of the National Finance Association (NFA), a non-governmental lobby group of Russian banks, told Reuters that the new sanctions would not prevent foreign investors from buying Russian government bonds.

Zablotsky, who is involved in preparing documents for OFZ in yuan, said the issue is a matter of bilateral relations between China and Russia.

“I think we can gradually finish this job and see OFZ in yuan within two years,” Zablotsky said in an interview.

Russia uses OFZ bonds to plug holes in the budget, giving newspapers a quality rating on a weekly basis. OFZs are popular among foreigners for their lucrative returns, but in recent months, major Russian banks have emerged as the main buyers of government debt in weekly auctions.

U.S. investors held 40% of OFZ bonds outstanding as of April 1, while Chinese investors’ share was 4%, according to the Russian central bank.

Zablotsky said U.S. investors continue to buy OFZ bonds in the secondary market, and demand for government bonds from foreigners, including Chinese investors, remains high.

The rapprochement with China, Russia’s second largest trading partner after the European Union, comes as the finance ministry abandons US dollar assets from its National Wealth Fund and increases its yuan and gold holdings.

Russia has gradually reduced its holdings of dollars since the imposition of Western sanctions after Moscow’s annexation of Crimea in 2014, and has sought to partially decouple from the Western financial system.

Zablotsky said the need to live under sanctions has helped Russian banks weather the coronavirus crisis because they have already accumulated enough cash and cash in the forex. (Written by Andrey Ostroukh, edited by Alexander Smith)


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