Russia's Government Debt Yield Approaches 16%

The cost of raising funds to finance the budget deficit in Russia is increasing: the yield on long-term government bonds has once again approached 16% per annum. The bond market has declined for the third consecutive day, with the RGBI index falling to 113.27 points, the lowest level in nearly a month. Over the day, the index lost 0.84 points, following a drop of 0.37 points on Friday and 0.79 points on Thursday. The rise in yields makes new borrowings more expensive for the budget, especially against the backdrop of an increasing deficit, which reached 6.45 trillion rubles by the end of July. The worsening situation with fuel, caused by drone attacks, is also negatively impacting the market. Four refineries have halted oil processing, and restrictions have been imposed on gas stations in ten regions. This could accelerate inflation and complicate further reductions in the key rate by the Central Bank of Russia. Problems in the debt market coincided with a decline in Russian stocks: the Moscow Exchange index lost about 2% after a sharp collapse on Friday. Domestic borrowings remain the main way to cover the deficit, while war expenses may exceed the planned 12.9 trillion rubles.

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