Russian Treasury to Offer Budget Funds by Repos This Year

Russia plans to begin offering banks money from the treasury through repurchase agreements this year, Finance Minister Anton Siluanov said.

“We must continue working to introduce a way to provide temporarily available budget funds through repo deals,” Siluanov said in a speech to Federal Treasury officials in Moscow today. “We and the central bank will provide liquidity on roughly equal terms.”

Russia, the world’s largest energy exporter, ran a federal budget surplus that reached 789 billion rubles ($26 billion) in the first 11 months of last year before ending with a deficit of less than 0.1 percent of gross domestic product. Providing additional cash throughout the year would help reduce the government’s impact on the amount of rubles held by lenders, which the central bank says complicates its monetary policy.

The plans have already received backing from the central bank and are currently being approved by the Finance Ministry, Roman Artyukhin, head of the treasury, told reporters today. The repo deals can only begin after changes are passed to the Budget Code, he said.

Repo agreements with the treasury will be similar to those now offered by Bank Rossii, and they’ll be available to a larger group of lenders because the loans are backed by collateral, Artyukhin said.

Short Horizon

“Our horizon is very short, 30 days tops,” he said, responding to a question on the length of the treasury repo deals. “Even better would be one day, one night -- that’s our market.”

The government will continue offering the same funds through deposit auctions, which don’t require collateral and are limited to the largest and safest banks, Artyukhin said.

“They’ll be for a small group of banks -- the very best -- and very expensive,” he said.

Banks bid for 25.6 billion rubles at the treasury’s deposit auction yesterday, more than the maximum of 20 billion rubles offered, even after the minimum rate was raised to 5.8 percent from 5.6 percent a week earlier.

A second auction of 20 billion rubles for five days will be held tomorrow, the treasury said on its website last week.

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