The Finance Ministry announced Friday that it will hold the country's first auction of one-year government bonds next week in a move that bankers called a key step toward establishing medium-term investments in Russia.


Marina Chekurova, deputy head of the Finance Ministry's securities department, said that the government planned to auction 200 billion rubles ($66.6 million) in 12-month treasury bills at the Moscow Interbank Currency Exchange on Oct. 26.


"It is a test auction," she said, adding that no schedule for further auctions had yet been set. "We shall see what will happen and what we shall do about it."


The auction comes at a difficult time for the ministry's securities program. The last auction of six-month bonds was canceled and the Central Bank was forced to intervene heavily at two auctions of three-month t-bills as the falling ruble attracted funds to the hard currency market. But Alexei Rasskazov, head of the securities department at Stolichny Bank, welcomed the new bonds, saying that they would offer an incentive to commercial banks to start medium-term investment. Most commercial banks still prefer to make money in currency speculation and short-term credit markets, seldom making loans of more than six months.


"The Finance Ministry and the Central Bank want to give us a positive signal that the time for medium-term investment has come," said Rasskazov.


He warned, however, that 12-month securities were risky for commercial banks, since they might run into problems meeting short-term obligations if inflation and interest rates rise.


Vadim Yegorov, spokesman for the Moscow Interbank Currency Exchange, said that the new securities will help the government to realize longer-term investment programs. The government uses income from bond auctions to finance deficit spending without fueling inflation.