Russia Cancels Second Consecutive Government Bond Auction Due To "Market Conditions"

Tyler Durden's picture

In the aftermath of yesterday's Developed Market rout, it may come as a surprise how - relatively - quiet the EM bourses were. Because while the now ongoing Argentina reserve depletion continues (the country has $28 billion left - a drain of over $2 billion in two weeks, the Turkish political instability is still there, and everyone from Hungary to South Africa to India are lamenting the Fed's taper, for the most part traders were ignoring developments out of the emerging world. This may change today when just over an hour ago, Russia announced it would cancel a bond auction for the second consecutive week after an emerging-market rout sent yields on January 2028 bonds to record highs. The reason cite: market conditions.

From Bloomberg:

The Finance Ministry scrapped the sale after “an analysis of market conditions,” it said in a website statement today. The government plans to offer 275 billion rubles ($7.8 billion) of securities this quarter, according to a timetable published at the end of last year.


Appetite for riskier developing-nation assets has soured amid signs of a slowdown in China as the Federal Reserve cut stimulus. The yield on the 2028 security fell one basis point, or 0.01 percentage point, to 8.44 percent today, compared with a record high of 8.58 percent on Jan. 30.


The ruble has weakened 6.9 percent this year, the worst-performing among 24 emerging-market currencies tracked by Bloomberg after Argentina’s peso.

Below is the rather unverbose statement posted on the website:

On 5 February, 2014 OFZ auction cancellation


The Ministry of Finance of the Russian Federation hereby informs on OFZ auction cancellation on 5 February, 2014. Decision to cancel the auction was taken with a view to the current market conditions.

It goes without saying that one particular group of investors hoping the history does not rhyme are those currently holding Russian assets: after all the last emerging market crisis which peaked in 1998 did not have a happy ending for anyone invested in Russia. Or LTCM's Nobel-prize winning economists' models for that matter.

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slotmouth's picture

Are you sure it wasn't because of the weather?

GetZeeGold's picture



They ran out of Putin towels. The person in charge of that was severely reprimanded.

nuclearsquid's picture

...and put on the roster as a hafnium carrier for the Chernobyl decommissioning.

Temporalist's picture

Putin didn't take his shirt off enough...beause of the weather.

redpill's picture

I think I'll just write the IRS a note this year that says I've decided not to pay my taxes because of bad weather and market conditions.

fockewulf190's picture

That´s a bit too cerebral for the sheep to know about.  You have to keep ém dumb, thus the sheep must be simple sheep speak form...that the weather is "Baaaaaaaaaaaaad".

The Dunce's picture

Can this contagion in the emerging markets spread to the Russian currency.  I don't know.  I'm still hoping it's the weather. 

yatikto's picture

got a question.  what if Russia does not havea bond auction next month too?  and a month after that? or a small one?

And lets say they want to be paid in rubles for the gas and oil?   what then?

Truther's picture

It was the Yellen swearing in I think that pissed them off.

youngman's picture

Wait till Sochi...they wont be able to sell anything....

The Wisp's picture

you mean like when all the Foreigners come home and tell the world what Russia really looks like behind the Curtain of Glitter ?

RaceToTheBottom's picture

I always knew Putin was a Glitter boy.....

The manliest men always are....

aVileRat's picture

Recall, post-Olympics there is often a severe downturn from high construction debts & foreign currency switching when the tourists go home. Only two Olympics in the past 30 years have been net positive for their host countries.

A country like Russia will see yields go bid for sure.


Urban Redneck's picture

As long as oil prices remain high, the Russians have a fair amount of flexibility in regards to either adding or removing liquidity to manipulate yields before there are fiscal policy ramifications. But if they play defensively with their marketing/propaganda of such an action- they will lose traction just like the rest of the EM currency basket as the lemmings pile crowd the exits.

CrashisOptimistic's picture


Not quite.  When did the Saudis last worry too very much about a bond auction? 

Russia pumps MORE oil than they do.

Urban Redneck's picture

I am not thinking about bond auctions in terms of raising money for government spending (where I agree with you), I am thinking about bond auctions and the resulting yields in the context of serving as a benchmark for other interest rates in the domestic financial markets. (where an ongoing lack of auctions/benchmark intervention introduces certain complexities to maintaining the status quo)

AdvancingTime's picture

Contagion is a problem, we  are all interconnected for better or worse. A bad apple can spoil the whole basket. Welcome to the world our leaders have designed or allowed to form. Whether by design or merely as a byproduct of globalization we have weaved a web of financial transactions that circle the globe.

Over the last several years as money was printed by the central Banks it was not contained in the countries where in was printed. This money flowed across borders influencing and distorting markets and prices across the world. Do not be surprised if some people use this as a reason to call for a new "World Currency" as outlined in the post below,

Croesus's picture

@ AdvancingTime: 

Without even reading your post, I can tell you with 100% certainty that a new Global currency regime is in the offing. The old system has to die first, though, in order for it to happen. 

The books will be balanced, and Gold will be the mechanism that allows the balance, and the transition to take place. 


new game's picture

they are trying a quotes world currency called the euro. hows that working out?

if eruoland is what's to come, count me out...unless i live in germany...

SheepDog-One's picture

The Euro was their test case for the planned 1 world currency idea, personally I think they're all idiots and they'll just cause billions of deaths.

Global Observer's picture

There was never a plan for one world currency outside of the conspiracy theory circles. However there is a plan for an international trading/reserve currency that is not the national/regional currency of any country/monetary union. No, this currency is not going to be controlled by Goldman Sach's or other Western banks. Since this currency will not be under the control of the USA, the USA is opposed to it. It will still come into existence and when that happens, the US$ will be dumped in favour of this currency and it will be game over for the US$. If you are heavily invested in gold and live in the West (but not in an export surplus country like Germany or Netherlands), better pray that this currency is not going to be backed by gold. Because if it is, your government might simply confiscate the gold in private hands to exchange for this currency in order to pay for the imports that they could hitherto pay for in their own domestic currency.

Croesus's picture


Next, you'll be telling me how "The System" is coming for peoples' guns. 

Good luck with that. 

Everyone in these parts has lived in "boating-accident prone" parts of the country. 


Seasmoke's picture

+5000 Croesus.......anyway to speed this process up ?

GetZeeGold's picture



Well, I for one am hoping no one will notice that little outburst.


The dude is giving away our best stuff here.

Croesus's picture

@ Seasmoke: 

How are you, man? I still follow local news, but the site doesn't let me comment anymore... 

Speeding-up the process, is as simple as "Stop supporting the things you don't like about this world". You hate the banks? Stop playing in the markets - Pay off your loans, and stop storing your wealth in a system that uses it against you.

"I will cut this man's throat with his own sword".  

@ GetZeeGold: 

My friend: 

While you may have dry powder that you want to use, please understand that it's in most peoples' interests to see this disgusting comedy die the tragic death it deserves. Hurrying the inevitable benefits everyone (except the scumbags who 'ruined it' for everyone). 


GetZeeGold's picture



True dat......death to the scumbags!

LawsofPhysics's picture

Please, nothing is going to be "balanced", unless you mean species wise (as in humanity is culled back to a more "balanced" number).  The real issue is energy available for consumption and resources (Oil, gas, coal, etc.).  The question is what other sacrifices will be made.  There are 7+ billion (and growing) in this biosphere and the debt problem exists everywhere on earth.  How does one "balance" anything in that case, are there people on Mars that have a surplus and no debt?  Please, yes, it's good to have PMs and physical assets of real value, a dependable tribe etc., but nothing is going to be "balanced" without major sacrifices.  History is very clear on this.  Pull you head out of your golden ass.

Croesus's picture

@ Laws of Physics: 

Respectfully, sir (and I do enjoy your posts, so the respect is genuine), I would like to direct your attentions, here: 

Bill Gates:

Ted Turner:

Prince Phillip:


Understand that these are people who are used to "calling the shots"; It is interesting to note that they have come to the same conclusion. 

LawsofPhysics's picture

Unless they have a massive stockpile of energy and resources available for consumption, what they conclude is highly irrelevant. It wouldn't be the first time a group of arrogant pricks destroyed society as we know it.  I see all kinds of trade happening, most of it avoiding fiat altogether.

Be optimistic, this is a good thing.

Croesus's picture

@ LawsofPhysics: 

I am 100% optimistic, because like you, I realize that hubris and arrogance corrupt clear-thinking. 

Stay well, my friend! 

Oh regional Indian's picture

Either way, Russina (or is it Chussia) are in way better shape, individually and especially in a bear-dragon tango than most places in the world.

And both populations have seen such shitty times/lives for so long, that adversity to them is just how life goes.

As for EM markets, very strange, India's BSE actually gained today. We could be at some totally whacked out tipping point if this trend holds. OR, simple hot money Institutional flows, floating boats here, sinking a few there.

Real world is exactly as it was yesterday.


americhinaman's picture

Either way, Russina (or is it Chussia) are in way better shape, individually and especially in a bear-dragon tango than most places in the world.


Indeed... the broad fiscal and FX reserve positions that both countries have is much stronger than the US, Europe, and most other developed or EM countries.  Both have high FX reserve holdings relative to their macroeconomies, and both have manageable fiscal deficits and government debt relative to govt-held assets.  

Given these similiarities in macro positioning, it seems odd that RUB currency has crashed especially given CNY strength.  I suspect it may have something to do with western politics and developments in the Ukraine, and the vulnerability of Russian capital markets to western media propaganda and western bank manipulations.  CNY is bulletproof as China has nearly 4 trillion USD value FX reserves (plus a bunch of other assets - land, SOEs... including gold miners, etc.), but Russia also half a trillion USD in FX reserves, plus an impressive roster of real assets, to go with very little govt debt.  

It's pretty obvious the reason they cancelled the debt auction is because they don't need to borrow money... they can easily draw down a small portion of their FX reserves to pay any expiring debt.  Also, being a leader in energy production and various metals mining, they have a huge amount of resources that I'm sure they could sell if need be.  Failing that, I'm also pretty certain that China would happily arrange term lending to Russia in return for continued/more favorable treatment in energy/mining contracts.

Non Passaran's picture

This is beginning to look good!

Next thing to unhype: bitcoin currently on way to $799.
Paging phonystar: should we go all in? It seems like Bitcoin could still recover and based on my tech analysis it could rise as high as $100K, but can you confirm that for me?

BlackBoxFund's picture

The conned will be conned no more.

In 1998 one year SberBank and Gazprom trade finance paper was issued at over 20% +   Has anything changed ?  YES in my opinion, this time it will be one year JP Morgan paper which will first see 20% +   I believe the USD is almost ready to revalue, against everything tangible soon.   It is time for the $ decline.

The small Emerging country currency declines weare seeing recently are just the tip of the Iceberg as Global Money management Sheeple are trying to use the same strategies they used in 2008-2013 again.  

Of course now the US Dollar has been debased to a breaking point from excessive money printing and the outcome should be VERY different for the Banksters.   Has anyone heard the mass disinformation media mention of Bank Credit Derivatives and Counter Party risk recently ?  You will !

Save_America1st's picture

All the more reason, I'm sure, for Russia to continue partnering with China to a certain extent in pushing the world away from using U.S. dollars and agreeing to replace the dollar as the world reserve currency. 

And did anyone happen to read Koos Jansen's latest translation of the official Chinese Gold Policy papers?  Very interesting stuff if the translation is as accurate as they say it is. 

Statements such as:  "Develeop the gold lease market based on free market principles."  "Step up regulation of the gold market."  "Protect the investors...", etc. etc. 

All sounds nice and rosey...and whether they mean it or not it will still further weaken West's criminal and fraudulent grip on the paper scam futures commondities markets. 

Tick-tock, bitchez...


I think it's worthy of top posting by ZeroHedge:


The Chinese Government’s Gold Policy, From The Horse’s Mouth

Notes from the translator, LK:


“This is a detailed policy memo from the country’s highest government to let the various ministries and department know of the direction, intentions, progress and steps of development of the many facets and components of the gold market that serves both the gold industry and other areas of finance.


So they sure are in it for the long haul and mean it well for everybody. I’d say this is pretty convincing of our possible future landscape!


I consider this one big piece of the jigsaw, as so far as there has been little of what China thinks or is doing, other than buy buy buy.”


Here we go..

gwar5's picture

Why don't they just buy their own bonds? They can call Bernanke, ask how it's done.


29.5 hours's picture


Absolutely. If the Communists had a Fed, they could completely ignore capitalist market conditions.



wallstreetaposteriori's picture

Because even Russia doesn't want to own their shit paper.  If your planning on defaulting on the bond its better to just sell it to china.

RaceToTheBottom's picture

Russia still must learn that corruption must follow western guidelines.

You can't just have every country thinking that they can choose any old sort of corruption...

LawsofPhysics's picture

Please, Russians don't give a shit.  They have been conducting exchange and trade through all sorts of mechanisms for quite a while now.

RaceToTheBottom's picture


Geeze, has spoonfeeding has become the norm here?....

LawsofPhysics's picture

So is this a buy or sell the ruble situation?  I'm confused.


fiat is fiat is fiat is fiat...

hedge accordingly.

foodisgood's picture

Think Russia would stop selling bonds altoghther? Just use the currency in the system to get by? Tell the bankers SWIFT, WTO and BIS to pound sand and maybe just issue hard currency backed by... maybe Gold?

Naw, too many here would benefit while the sucking sound of power being destroied would make the world so great the ZH naggers would find a reason to whine about a truly free market and how they shoupd be even richer and more powerful - like those they hate.

LawsofPhysics's picture

What part of all paper promises/fiat will go to zero don't people understand?

youngman's picture

The Russians sell bonds to play in the Western world money game....they would never buy a bond themselves..its just to get our money...

papaswamp's picture

All is well party on comrades!

syntaxterror's picture

I'm sure Yellen is a buyer. Just call that skank.

TheAnswerIs42's picture

From the Economist (check out the article, the cover picture is a classic!):

Ten years ago the Russian budget balanced if oil was around $20 a barrel; today it needs to be around $103. The “Urals blend” price has fallen to $108. Meanwhile, new shale gas, which Mr Putin loves to ridicule but in fact typifies the American entrepreneurialism that could never thrive in his kleptocracy, promises to push oil and gas prices down.

Now that energy prices have stopped rising, best estimates of GDP growth have been cut to below 1.5% in 2013 and to 2% in 2014. America and Britain are both doing better, and Russia’s BRIC competitors, Brazil, India and China, are growing far faster. Russia is in the same growth league as the flagging euro zone—the weak countries Mr Putin pours scorn on.


The problem, as always, is governance. The list of needed reforms is familiar: more competition, the privatisation of state firms, better protection for investors, a more reliable legal system and a transparent regulatory framework. Yet the regime cannot implement such changes, for it exercises political control by controlling the economy: the status quo in Russia is preserved through monopoly rents, state-owned companies, a malleable judiciary, an opaque regulatory system and firms that rely on Mr Putin’s favour. So long as the current political system prevails, Russia will remain economically enfeebled.