Ministry of Finance announces the parameters of the new financial instrument
The Ministry of Finance hopes to get the people to take the money out «from under their mattresses» and invest in newly created federal loan bonds, Minister of Finance Anton Siluanov announced at the Russian Investment Forum in Sochi. The first set of bonds, worth 20 billion roubles, is set to be issued in April.
The bonds will be issued with a par value of 1000 roubles and for a period of three years. Investors can purchase between 30,000 and 25 million roubles worth of bonds from one emission. Coupons will be paid out twice a year. Siluanov stated that the size of the coupons will increase in order to ensure that the average yield of the federal bonds is 0.5 percentage points higher, with the initial price being lower than the final price. Konstantin Vyshkovsky, Director of the Debt Department at the Ministry of Finance, clarified that the coupon will increase from 7.5% to 10.4%.
The regulations will allow the bonds to be handed down as a form of inheritance, the Minister of Finance added. «It is a very interesting instrument,» Siluanov noted, «Ill buy some bonds myself, so that I can find out first-hand how the instrument works.» The Ministry of Finance guarantees the 100% face value of the bonds: «There will be no discounts or losses.» He highlighted that the bonds are expected to yield 8.5%, which is more profitable than deposits.
The federal bonds can be purchased at Sberbank of Russia and VTB 24 branches, as well through online banking mechanisms. Siluanov added that 2030 billion roubles worth of bonds would be issued annually, and «if interest proves even greater, then we will increase the number of bonds issued.»
The Ministry of Finance first proposed the public bonds in mid-2015, with the first issue being planned for 2016. The plan fell through, however, because the banks were demanding excessively high commission fees, among other things. Last week the Ministry of Finance published a draft document setting out the main parameters of the public bonds. According to two federal officials who talked to Vedomosti, this will be the first step towards the issuing of federal bonds.
The new public bonds are similar to deposits in that they cannot be traded on the secondary market. The bonds cannot be resold or used to make purchases.
Source: Vedomosti (Only Russian)