Finance Ministry Sells 1.5 Trillion in T-Bills

The Finance Ministry has sold a record 1.5 trillion rubles ($761 million) in three-month treasury bills at its largest-ever monthly auction, Bella Zlatkis, chief of the department of securities and financial markets at the ministry, said Wednesday.Commercial banks oversubscribed the auction by about 9 percent Tuesday, placing 1.639 trillion rubles in bids, nearly 1.5 billion rubles of which were satisfied at an average annualized yield of 159.2 percent, Zlatkis said. She said that the auction was quite successful, despite gloomy forecasts from some analysts on the ability of the Finance Ministry to sell such a big issue. "We always make a decision on a volume of the issue only after a serious study of the market," she said.The yield represented a significant reduction compared to the last monthly T-bill auction on May 17, at which the government sold 399.3 billion rubles in bills at an average annualized yield of 179 percent.Mikhail Laufer, securities expert at the Moscow Interbank Currency Exchange, said that the lower yield was in line with a general reduction in interest rates on the interbank market. Annualized three-month rates on the interbank credit market reached between 150 and 160 percent this week. "The lower yield is favorable both for dealers and for the Finance MInistry," Laufer said. The Russian government, which plans to issue a total of about 9 trillion in treasury bills this year, uses the bonds as a non-inflationary way to finance the budget deficit. The lower the annualized yield, the less the government pays to finance spending. Banking sources have recently suggested that commercial banks could be conspiring to drive prices on treasury bills down at primary government auctions, then reselling them at a much higher price on the secondary market. After the May auction, prices on the treasury bills immediately shot up in secondary trading.Zlatkis said, however, that the Finance Ministry's only concern was that the banks' speculation did not hurt the market. "It should be a fair market, which allows dealers to make a reasonable profit," she said. "When dealers cannot make money, the market dies."Fifty-eight dealers are authorized to trade in the government treasury bills.