The meeting was attended by the heads of the RF Finance Ministry, the Bank of Russia, the MICEX, the NSA, as well the representatives of over 70 banks, insurance companies and mutual funds - participants of the government securities market.
At the meeting, Deputy Finance Minister Bella Zlatkis said, that as a result of the borrowings, the volume of the market of government securities, circulating on the market, will increase by the end of 2003 to 300 billion ruble from 217 billion rubles as of the end of 2002. The market volume will increase not only as a result of the general increase of the issue of government securities, but also because the Bank of Russia will offer market government securities from its own portfolio. The Finance Ministry intends in 2003 to distribute long-term (10-12 years) OFZs, and, if the situation is favorable, OFZs with fixed coupon payments. Alexander Chumachenko of the Office for the management of the internal debt of the RF Finance Ministry added that it is possible to increase the volumes of the issue of amortization OFZs to 50-60 billion rubles each, OFZs - to 18-20 billion rubles, and semi-annual GKOs - to 5-7 billion rubles. B.Zlatkis also said that this year, the Finance Ministry intends to pay off internal borrowings to the amount of 112 billion rubles, while in 2002, this figure reached only 90 billion rubles. B.Zlatkis explained that the increased repayment of the national debt is connected with payments for novation OFZs, which were issued after the August of 1998 and during the novation of the third tranche of OVVZs.
Speaking about the development of the secondary market, Deputy Chairman of the Bank of Russia Konstantin Korishchenko said that today, according to the Bank of Russia, the profitability of government securities are consistent with the current macroeconomic situation, even exceeding the forecast inflation level. This must maintain investors' interest in the market. At the same time, considering the low volatility of government securities' prices, the market is not speculative, which helps to regulate the liquidity of the banking system. In the context of the state budget surplus, stimulating the access of investors-nonresidents to the national debt market is of little importance. To develop the secondary market of government securities, in 2002, the Bank of Russia launched new instruments of direct and modified REPO, which help to regulate the liquidity of the banking system. Director of the Department for operations on the open market of the Bank of Russia Sergei Shvetsov added that in the near future, the number of partners, with whom the Bank of Russia conducts direct REPO operations, would grow considerably. He also spoke about the launching of the inter-dealer REPO market in April.
According to the MICEX CEO Alexander Zakharov, in 2002, the main parameters of the Russian government securities market improved considerably. The nominal volume of the market of traded government securities increased by 36% (from 160 to 217 billion rubles). The trading volume of government securities amounted to 255,8 billion rubles, a 27% increase against 2001. The market became more consolidated, that is, the number of traded issues decreased, while the average volume of distributed issues grew from 4,7 to 6,7 billion rubles. The duration of the debt grew from 375 to 493 days (31% growth). Thus, conditions were created for the growth of the market liquidity.
The transparency of the national debt market increased considerably. In 2002, the Finance Ministry presented, for the first time, a yearly issue calendar. It is of great practical value for market participants as it makes it easier for them to implement investment strategies. The execution of the issue calendar and the schedule of payments for the debt, as well as limited borrowings, allowed the Finance Ministry to restore the confidence of banks - the main players on the government securities market. In 2002, their share among the holders of GKOs-OFZs increased by about 22%.
In 2002, the number of the GKO-OFZ market dealers increased by 18 organizations and reached 298. In January-December, 2002, the most active dealers on the GKO-OFZ market were: Sberbank, Bank Credit Swiss First Boston, Deutche Bank, KB Citybank, Promyshlenno-Sroitelni Bank, ING BANK (Eurasia), International Moscow Bank, International Bank of St.Petersburg, Moscow Municipal Bank - Bank of Moscow, and Raiffaisenbank Austria.
New types of securities and operations with them are being put into exchange circulation. In November, 2002, the Bank of Russia, with the active participation of the MICEX and the leading dealers of the government securities market, renewed direct REPO auctions under the program of the creation of banks refinancing system. In November-December, 2002, the volume of REPO operations exceeded 26 billion rubles. Today, the MICEX is preparing to organize in 2003 the market of inter-dealer REPO operations. Thus, the auctions of direct and modified exchange REPO (the sale of securities from the Bank of Russia's own portfolio with their repurchase), together with inter-dealer REPO, will form the basis of the REPO market on the MICEX in 2003.
According to A.Zakharov, in 2003, the MICEX will focus on measures aimed at increasing the liquidity of the national debt market. These measures will include:
- the introduction (starting from 20 January) of an additional trading session, from 18-00 till 20-00, to provide a more convenient mode for the execution of second parts of REPO deals with the Bank of Russia (the banks will be given an additional possibility to execute second parts of REPO deals, using funds received as a result of the fourth phase of the multi-phase processing of payments in Moscow region);
- the introduction of a continuous trading session from 11-00 till 16-45 with the effecting of settlements for transactions in the course of trades (this is a new procedure of holding trades, implemented on the financial market for the first time);
- the organization of the Bank of Russia's deposit auctions, using the technologies of the MICEX trading system (this is a new additional service for the participants of the MICEX markets and a cheaper access of banks, especially regional banks, to the Bank of Russia's deposit system);
- providing market participants the MICEX's new analytical product: the system of monitoring of market liquidity parameters;
- the introduction of a new mode of concluding transactions with government securities with time of performance ?+n (this mode allows to conclude transactions without prepayment, reducing participants' costs);
- the creation of the market of inter-dealer REPO operations (after the Bank of Russia adopts "The Order of the Circulation of Government Securities and their Servicing" and "The Order of Concluding REPO Operations with Government Securities and the Bonds of the Bank of Russia");
- the creation in April-May, jointly with the RF Finance Ministery and Sberbank, of a high-technology auction market of government savings bonds. This new financial instrument is of great practical value for institutional investors (insurance companies, non-government pension and investment funds), considering their participation, starting from 2004, in the management of the accumulation part of pensions as stipulated by the pension reform;
- the restoration of the institution of primary dealers (within the specialized NSA committee, which includes representatives of the Finance Ministry, the Bank of Russia, the MICEX and the dealers of the government securities market).
