Russia to Launch Yuan-Denominated Government Bonds Amid Funding Struggles

Russia is set to issue government bonds in Chinese yuan for the first time next month, as announced by the Finance Ministry on Wednesday.

The ministry revealed that it will launch two series of OFZ bonds, each valued at 10,000 yuan (approximately $1,400), with maturity periods of three to seven years and semiannual interest payments.

Investors will have the option to purchase and receive payments in either yuan or rubles, as stated in the announcement.

The order placement is slated for December 2, with the actual sale scheduled for December 8.

Although the Finance Ministry did not disclose the total amount of yuan bonds, it indicated that this would be determined based on investor interest. According to a report by Reuters last month, the ministry was preparing to issue yuan bonds worth up to 400 billion rubles (around $4.9 billion).

The news agency further noted that ministry officials had engaged with prospective investors, aiming for a diverse array of participants, including banks, asset management firms, and retail brokers.

Discussions about issuing yuan bonds have been in the works for nearly a decade, but previous attempts faced obstacles from Chinese regulators, as reported by the business news outlet RBC.

This initiative comes as the Russian government seeks funding due to a significant decline in revenue. The Finance Ministry now anticipates this year’s deficit will reach 5.7 trillion rubles (about $63 billion), a substantial increase from an initial estimate of 1.2 trillion.

As of September, revenues from oil and gas had decreased by 20% year-on-year, and customs duties had dropped by 19%.

Currently, there are approximately 166 billion rubles (about $2 billion) worth of yuan-denominated corporate bonds in circulation within Russia, according to financial data provider Cbonds.