Russia’s Finance Ministry will issue its first series of government bonds denominated in Chinese yuan next month. This marks a significant shift in its funding strategy as Moscow seeks alternative financial avenues after traditional revenue streams declined significantly.
Russia decided to launch yuan-denominated OFZ bonds—federal loan bonds—to diversify its borrowing portfolio and mitigate Western sanctions. The government aims to tap new investor bases and secure capital for expenditures, facing a projected budget deficit considerably higher than initial forecasts.
The ministry will offer two distinct series of OFZ bonds, each valued at 10,000 yuan (approximately $1,400). The bonds mature in three to seven years, and interest payments occur every six months. Investors can purchase the bonds and receive payments in either yuan or Russian rubles. The Ministry of Finance announced that order placements begin December 2, with the official sale on December 8.
Discussions around yuan bonds spanned the past decade, but earlier attempts faced regulatory obstacles from Chinese authorities, RBC reported. The current urgency stems from Russia’s pressing funding needs, exacerbated by a sharp drop in state revenues. The Finance Ministry now anticipates a 2025 deficit of 5.7 trillion rubles ($63 billion), a significant increase from its initial 1.2 trillion ruble projection. The revised outlook underscores significant financial pressure on the Russian government.
Key revenue streams contracted considerably. As of September, oil and gas revenues fell 20% year-on-year, and customs duties declined 19%. These figures highlight the economic challenges driving the search for new funding mechanisms. The ministry engaged a wide array of potential investors, including banks, asset managers, and retail brokers, to maximize participation. The Moscow Times reported last month that preliminary discussions indicated a potential issuance of up to 400 billion rubles ($4.9 billion) in yuan bonds. The Russian market currently holds approximately 166 billion rubles ($2 billion) in yuan-denominated corporate bonds, providing a precedent for this new government offering. The Moscow Exchange will handle order book collection and technical placement.
The debut yuan bond issuance underscores Russia’s evolving financial strategy to adapt to a changing global economic landscape and secure fiscal stability.