Russia has launched a second issuance of sovereign bonds denominated in Chinese yuan, marking a continuation of its use of local-currency borrowing to meet financing needs. The Finance Ministry fixed the issue size at 10 billion yuan, roughly $1.5 billion, and set the coupon at 7.65%, citing information from a person active in financial markets. The ministry had previously indicated the coupon would not exceed 8%.
This sale comes in the wake of high-level discussions between President Vladimir Putin and Chinese President Xi Jinping in Beijing last week, underscoring the elevated economic ties between the two countries. It follows an initial foray last year when the Russian government raised 20 billion yuan in two tranches of local-currency bonds.
Authorities said the earlier yuan bond transactions were aimed at securing funds to cover budget shortfalls. Those shortfalls have been driven by increased military spending and softer oil revenues, factors the government has identified as pressure points on public finances. For the current year the government is targeting a fiscal deficit equal to 1.6% of gross domestic product, but the shortfall widened to about 2.5% in the first four months.
Officials positioned the new 10-year offering as part of a financing strategy to address the gap between revenue and expenditures. By tapping yuan-denominated markets, Moscow continues to broaden its funding sources and deepen financial links with China, now described as Russia's most important economic partner since the Kremlin's 2022 invasion of Ukraine.
Market participants will watch how the 7.65% coupon compares with domestic and international borrowing costs for the Russian government and how demand for the yuan paper develops. The sale follows the prior issuance pattern of selling in local currency markets to mobilize liquidity while managing currency and investor bases.
Context and implications
- Russia's second yuan bond issue totals 10 billion yuan, with a 7.65% coupon and a 10-year tenor.
- The offering follows diplomatic talks in Beijing and builds on last year's two-tranche, 20 billion yuan issuance.
- Proceeds are intended to help cover budget shortfalls linked to military spending and weaker oil revenues; the fiscal deficit target for the year is 1.6% of GDP but the gap widened to about 2.5% in the first four months.