BRICS member Russia has sold its first Chinese yuan-denominated bonds on Wednesday, reported the Financial Times. Reports suggest that Russia is selling the bonds to fund the war against Ukraine while deepening its ties with China. The ‘dim sum’ bond experienced high demand in the market, raising close to $3 billion on the day of its launch.
Russia’s Finance Ministry confirmed it issued RMB 20 bn ($2.8 billion) of government bonds in the Chinese currency. Russia is strengthening its ties with its BRICS counterpart China, issuing the Chinese yuan bond, as the Communist country is helping its economy stay afloat despite being sanctioned by the White House.
Russia is opening the route to tap China’s low interest rates for domestic funding. The RMB 12 bn bonds will mature in 2029 at a yield of 6%. In addition, the RMB 8 bn bonds will mature in 2033, yielding 7% gains. The BRICS members have bolstered their ties with the new Chinese yuan-denominated bonds.
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BRICS: Chinese Yuan Bonds Get Big Takers in Russia
The demand for the Chinese yuan bond in Russia is high, with both retail and institutional purchases. “We have succeeded in creating a liquid sovereign benchmark that will serve as a pricing guide for corporate borrowers and will contribute to the deepening of bilateral co-operation between Russia and China in the financial sector,” said Anton Siluanov, Russia’s finance minister.
The Finance Ministry said that more than half of the bonds were purchased by banks. A handful of banks in Russia now have exposure to the Chinese currency and are also financing trade with China. The move bolsters the BRICS alliance, and the Chinese yuan bonds add to it. The sales “give the Chinese more confidence that Russia is aligned with their geo-economic agenda of internationalization of the yuan”, said Maximilian Hess, Founder of Enmetena Advisory.