The Ministry of Finance of Russia failed for the third time in July to place federal loan bonds (OFZ), as investors demanded higher yields that the ministry considers unacceptable. This indicates a decline in demand for Russian government debt amid the Kremlin's growing financial needs. This was reported by the Foreign Intelligence Service of Ukraine, according to UNN.
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The FIS recalled that OFZs are the main instrument through which the Russian government covers the budget deficit and refinances old debts. The main buyers of such securities are Russian banks, investment companies, and pension funds.
As noted by the intelligence service, on June 24 and July 8, the Russian Ministry of Finance canceled auctions due to high market volatility, as investors demanded yields that would significantly increase the state's debt servicing costs.
On July 14, the Russian financial department tried to change its approach and offered only floaters — bonds with a floating coupon that reduce risks for buyers. However, the very next day, the Ministry of Finance rejected all bids for these securities as well.
The problem turned out to be not in the format of the bonds, but in the fact that investors are generally not ready to lend to the state without a significant risk premium
The Foreign Intelligence Service notes that the refusal of unfavorable placements only slows the decline in the value of already circulating OFZs, but does not solve the main problem. The need for budget financing is being shifted to the following months, when Russia will have to borrow even more and at a higher price.
According to FIS data, Russia's domestic borrowing plan for the third quarter of 2026 envisages raising about $19.4 billion. After the failure of the auction on July 15, fulfilling this plan without a significant increase in bond yields seems unlikely.
The intelligence service believes that the most likely scenario for the Kremlin will be a combination of more expensive borrowing with administrative coercion of state banks to buy bonds they do not need.
This will allow avoiding a high-profile default, but will tie banks even more tightly to the state, reduce lending to businesses, and effectively shift the budget hole onto the entire economy, deepening the stagnation that the Kremlin presents as stability