In April, the Russian government intends to issue federal loan bonds (FLB) for the population. The goal is borrowing in the domestic market. It is worth noting that in Russia the government at the time of financial instability always remember that money can be borrowed from the population. Practice shows that this debt is almost never returned.
Longer possession, higher coupon
By buying federal loan bonds, a citizen lends money to the state for a certain period. The owner of FLB receives coupon income (usually every six months) throughout the life of the bond. After its expiration, the original value of the bond itself is returned. Government bonds for the population, according to the plan of the Ministry of Finance, will differ from the "classical" FLBs. For example, they can not be sold, but can only be presented for redemption. It can happen not earlier than in a year of possession, and only if a part of the coupon yield is lost. The rate of the same coupon will be comparable with the usual FLB.
According to the Minister of Finance Anton Siluanov, it is planned that the issue of federal loan bonds for the population will occur in April. The expected yield of securities is 8.5%. Bonds will be issued every six months, the circulation period will be three years. In turn, the coupon will be paid twice a year without adjusting for inflation. Anton Siluanov explained that the longer a person has paper, the higher the coupon will be.
The volume of the first issue of FLBs for the population will be 20 billion rubles. People's bonds can be purchased through Sberbank, VTB-24. The investor can invest in the range from 30 thousand to 25 million rubles per one issue. In other words, the focus is made to a greater extent on pensioners and people with a small income.
According to media reports, the officials are inspired by the Soviet experience of the circulation of state loan bonds, when bonds could be purchased at the post office. Therefore, it was decided that today a reliable financial instrument is required, without any game of volatility and market risks. It should give an opportunity to buy paper today, and tomorrow to return money at a profit. In order to prove that this financial instrument is reliable, Anton Siluanov himself intends to purchase FLBs for the population. He was supported by the head of Sberbank German Gref, who, in turn, also promised to invest in popular bonds. German Gref explained: if he sells them, then, probably, will also have to buy them.
"You can not sell what you are not ready to buy yourself," the head of Sberbank explained his position.
It is worth recalling the sad experience for the population of the existence of bonded loans. In total, about 65 bonded loans were issued in the USSR, and most of them were in circulation until 1957. After 1930, the subscription in installments on bonds actually became mandatory. This happened according to a simple scheme. Instructions on the procedure for placing the loan, as well as forms for accounting, processing and advance amount of bonds, were received from enterprises from savings banks to enterprises and collective farms. For obvious reasons, at that time there were practically no people who refused to purchase bonds.
In order to somehow deal with debts to citizens, in 1930-1941, all bonds were unified. The loan term increased to 20 years, the repayment was postponed for up to 19 years, and the yield was reduced to 3-4% per annum. In the late 1950s, it turned out that the current costs of servicing all issued government loans exceeded budget revenues from the placement of new securities. As a result, the state did not pay off its obligations. A depreciated and useless paper for a long time had been gathering dust in the chests.
Finally, let us recall comparatively recent events. So, in May 1994, the Ministry of Finance issued bonds of the domestic foreign currency loan (DFCL). The bonds were issued in five tranches with maturities ranging from one to 15 years. But the state also did not pay off. The only debt that the Ministry of Finance paid off was state short-term bonds (T-bills): default on them was announced in August 1998. T-bills, in fact, were a pyramid. And as in any pyramid, there was more losers than the winners. And those who had insider information at that time won.
For individuals, the bonds were redeemed at par at January 1, 1999. However, it did not bring any joy to their owners, because on January 1, 1999, the value of the ruble fell from 6.5 rubles to 20.65 rubles per dollar.
In turn, experts doubt that FLB can be attractive. The head of the department of debt capital markets of Rosbank Anton Kirikhin believes that the purchase of FLB does not give the population any particular benefit. For example, the yield of government securities with redemption in 2021 is now about 8.4% per annum. Alexey Kupriyanov, head of the department of debt capital markets at BCS Global Markets, said he does not see any advantage of the new financial instrument, in comparison with the classic FLBs.
How is the Ministry of Finance going to lure the citizens this time? According to Anton Siluanov, the paper must compete with deposits, first of all, in its reliability. The Minister of Finance explained: the volume of investments in FLBs will be 100% guaranteed by the state, and there are no discounts here. But doubts about the reliability of the new financial instrument are still present. Senior analyst at Alpari Roman Tkachuk recalls that people still remember well the defaults in 1991 and 1998. Then investments in government securities led to huge losses.
Yes, today in the Russian economy the situation is more or less stable. Oil prices are at a high level. But to predict how they will behave tomorrow is quite difficult. We can not discount the sanctions against Russia. And if so, a mechanism is needed to attract the population's money to the domestic market. Another question is whether the government will be able to change the practice of the existence of loans in the country. Head of the Department of Financial Management of Plekhanov Russian University of Economics, Konstantin Ordov, recalls that the growth of FLBs in recent years was partially financed by the accumulative part of pension contributions.
According to the expert, the cumulative part was de facto expropriated, but the mechanism for increasing domestic debt can not be stopped, it is necessary to search for new financial sources. Apparently, they should now become the savings of citizens.
"I look with great concern at this prosject, realizing that in the absence of an effective financial system, these funds can not be used for the development of production. Without production, it is impossible to expect the return of these funds," believes Konstantin Ordov. The issue of federal loan for the population, which the Ministry of Finance plans to launch in April this year, will become a test for the state to fulfill its obligations to citizens, according to the release of monitoring the economic situation in Russia prepared by the Russian Academy of Science and Technology, the Institute of Gaidar and VAVT. In turn, Roman Tkachuk drew attention to the remarkable binding of the release to April, the "month of fools". The expert expresses the hope that the Russian government doesn't treat its own citizens as such.