OFZ Bond Details and Market Overview

OFZ bonds are a type of Russian government bond that offers a stable source of income through regular interest payments.

These bonds are issued by the Russian government to finance its budget deficit and refinance existing debt.

OFZ bonds are traded on the Moscow Exchange, where their prices fluctuate based on market demand and interest rates.

Investors can purchase OFZ bonds directly from the government or through a broker, with a minimum investment of 1,000 rubles.

The bonds have a fixed coupon rate, which is the interest rate paid to investors, and a maturity date when the bond expires and the investor receives their principal back.

You might like: What Is Government Bonds and Securities

The OFZ bond market has seen significant changes in recent years. Foreign investors increased their share of Russian OFZ government bond holdings to 26.7 percent as of April 1.

This is the highest level since early August and a recovery from a steep drop in 2018. The proportion of OFZs held by foreign investors has been recovering recently.

The Russian central bank has also raised interest rates sharply, pushing yields on Russian government bonds above 20%. This has put pressure on the Finance Ministry as it has to spend more and more on interest payments.

Servicing the public debt will cost the treasury 3.2 trillion rubles next year, a 40% increase from this year.

The Russian government's decision to raise interest rates has had a significant impact on the OFZ bond market. The key interest rate was raised to 21% per annum, and yields on Russian government bonds have increased to above 20%.

This has led to a sharp decline in the prices of OFZs, with the RGBI index falling to 97.33 points, its lowest level since 2009. The index has fallen nearly 20% this year.

The increased interest rates have pushed the yields on Russian government bonds above 20%, up from 10% at the start of the year. This has put pressure on the Finance Ministry as it has to spend more and more on interest payments.

Broaden your view: Aaa Muni Bond Rates

According to the article, servicing the public debt will cost the treasury 3.2 trillion rubles ($33 billion) next year, a 40% increase from this year. This is a significant burden for the Russian government.

Here is a summary of the key interest rate changes and their impact on the OFZ bond market:

Foreign investors increased their share of Russian OFZ government bond holdings to 26.7 percent as of April 1, the highest level since early August.

This marks a significant recovery from the steep drop in 2018, when concerns about potential sanctions led to a decline in foreign investor holdings.

The proportion of OFZs held by foreign investors has been steadily rising, reaching 25.9 percent just a month earlier in March.

The central bank's data shows a notable increase in foreign investor participation in the OFZ bond market, with a 0.8 percentage point gain in just one month.

This trend suggests that foreign investors are regaining confidence in the Russian bond market, despite initial concerns about sanctions.

Curious to learn more? Check out: Bond Market