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Ruble-Triggered Inflation Spurs Russia’s Linker Bond Plan

14.11.2014 Posted in Politics No Comments

From the Article by By Ksenia Galouchko  Nov 12, 2014 (Bloomberg News on-line)* Russia is weighing the sale of its first inflation-linked bonds as investors shun regular debt auctions amid the fastest surge in consumer prices since 2011. Linkers would give investors a hedge against inflation that reached 8.3 percent in October, the result in part of the ruble’s 29 percent plunge this year against the dollar. Finance Minister Anton Siluanov announced the possible sale two days ago at a meeting in the State Duma. The government has sold about one third of the 459 billion rubles ($9.8 billion) of bonds it planned to issue this year as inflation jumped and the economy teetered on the brink of a recession amid international sanctions tied to theUkraine conflict. Selling linkers could lure buyers concerned that the value of their fixed-income assets is being eroded, while also creating a market for investors’ inflation expectations, according to Ivan Tchakarov at Citigroup Inc. “Bonds tied to inflation are fully justified given investor interest in protecting the value of their assets,” Konstantin Nemnov, the head of fixed income at TKB BNP Paribas Investment Partners inSt. Petersburg, said yesterday by e-mail. They “should be of interest,” and help “the government as it seeks new sources of funding,” he said. The Finance Ministry canceled its fifth auction in a row yesterday, citing “unfavorable market conditions,” according to a statement on its website. Ruble Slump The government will prepare the “legal basis” this year for the sale of linkers before testing the market’s appetite for […]