MOSCOW (Reuters) – Russian banks raised 1.1 trillion roubles ($17.71 billion) at repo auctions held by the central bank on Monday, demonstrating sustained demand for cash as the government borrows heavily at OFZ treasury bond auctions.
The central bank was offering 1.5 trillion roubles at a one-month repo auction and 100 billion roubles at a one-year auction. Banks raised 1 trillion and 100 billion roubles, respectively. Repo, or repurchase agreement, auctions help banks to manage their liquidity.
The finance ministry of late has been offering OFZ bonds with strong premiums and has achieved its quarterly borrowing target more than 11 times over already.
Analysts have said the high repo limits could be due to active OFZ offerings. In mid-November, the finance ministry sold a record volume of government debt in a single day of 823 billion roubles.
The British Ministry of Defence highlighted that record debt issue as a sign Russia was borrowing to sustain defence spending.
Surging domestic security and defence spending is set to slash funding for schools and hospitals next year as Russia diverts cash to support its military campaign in Ukraine.
Russian banks are the main buyers of OFZs – a key source of budget deficit financing – which they then use as collateral in liquidity operations with the central bank, including repo.
In January, the latest data available, banks snapped up 70% of the OFZs offered by the finance ministry.
The central bank has said banks bought around half of the 215 billion roubles in OFZ rouble bonds issued by the finance ministry in October.
In total, the finance ministry has raised almost 1.7 trillion roubles via OFZ auctions since October. It raised 219.57 billion roubles last week alone.
($1 = 62.1000 roubles)
(Reporting by Alexander Marrow and Elena Fabrichnaya; Editing by Gareth Jones and Arun Koyyur)