"This isn't fair play and seriously compromises the t-bill market," said one dealer, who asked not to be named.
The government treasury bill program appeared to have landed on its feet Thursday when a 1 trillion ruble auction of t-bills was oversubscribed by 35.9 percent. The government sold 953 billion rubles in bills, compared to a mere 430 billion rubles at last week's undersubscribed three-month auction.
The annualized yield on the bills rose to a record 268.9 percent, compared to only 165 percent at the previous auction. The high percentage rate reflected t-bill yields on the secondary market, which rose near 300 percent this week as speculation in dollars drew funds out of the market.
Marina Chekurova, deputy head of the securities department at the Finance Ministry, expressed some concern over the high yield, but said that the government was generally "satisfied" with the auction results.
Dealers, however, said that the Central Bank had bought most of the issue by placing bids through commercial banks. The intervention, they said, kept the yield artificially low.
"Yields should have been still higher," insisted Igor Grigoryev, t-bill trader at the Russian Brokerage House. "Bids were hovering between 300 and 400 percent."
The next treasury bill auction is scheduled for Tuesday with a 1.4 trillion ruble issue. Mikhail Laufer, deputy chief of the securities department at the Moscow Interbank Currency Exchange, where t-bills are traded, said he expects a big drop in yield rates.
"Some people forgot that state bonds are very secure and that profitability should be lower on such investments," he said.
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