Moscow, 8 July 1998 (RFE/RL) - The Russian government today failed to hold
down bond yields at its weekly auction after foreign investors yesterday dumped
Treasury bills on fears of a ruble devaluation. The news means that Russia's bond market is becoming increasingly expensive as a source of borrowing for Moscow. That is fueling concern about a financial crisis because Moscow still needs to borrow $30 billion just to pay off debts
due later this year.
The Kremlin tried to offer 42-day Treasury bills today with an 80 percent rate
of return. But investors wouldn't touch the paper until the yields rose to 99.57
percent -- almost 20 percentage points above the central bank's benchmark rate.
The rate of return on investments generally rises as the risk increases.
Russia needs at least $1 billion just to cover debt payments this week. It
needs $6.6 billion to pay off previously issued bonds that reach maturity this
Anatoly Chubais, Moscow's chief negotiator with the International Monetary
Fund, says he thinks agreement will be reached this week on a new $10 to $15
billion IMF support loan. Moscow hopes the loan will help avert a financial
crisis. But Moody's, a leading U.S. credit rating agency, says the rapid
deterioration in Russia's financial markets means the government may need a
bigger financial package of $15 to $20 billion.
Moscow also needs additional funds to pay back wages to miners and other state
employees. Miners blocked traffic on the Trans-Siberian railway for a sixth day
today after failing to reach agreement with the government on the speedy payment
of back wages.
See related story:
Russia: High Bond Yields Trap Moscow In Borrowing Dilemma