MinFin Head of the Debt Department Konstantin Vyshkovsky commented on the results of the road-show on inflation-linked OFZs the ministry conducted in the US and UK. The official reported high interest in the instrument and indicated that the inaugural issue might be placed in the syndicate format to ensure more efficient pricing of the new instrument. The considered size of the issue is RUB 150 bn.
The inflation-linked RUB bonds are a much needed instrument for a number of reasons. Firstly, it is the optimal structure for raising long-term funding in the event of significant discrepancy in views on the long-term inflation path. Secondly, they are needed as a tool to reliably measure inflation expectations, which is a pressing task in the context of the CBR’s adoption of a comprehensive inflation targeting framework. Thirdly, it is a potent signal that the government itself is confident in the sustained reduction of inflation, and has ‘skin in the game’. We also note that some corporations (e.g. Rosseti yesterday) have already voiced significant interest in following the sovereign with inflation-linkers.