This text is an automatic translation from Русский. It was generated by AI and may contain inaccuracies.
Read original →To Borrow or to Print: Why Did the Finance Ministry Exit the OFZ Market?
On July 20, the Finance Ministry announced it was suspending OFZ bond auctions "to help stabilize the market situation." Behind this dry formulation lies a rare occurrence: a government that needs to borrow more than 5 trillion rubles from the market in a year has voluntarily withdrawn from that very market. We examine why the government debt market has shut down and what this means for the budget, the ruble, and the population.
First, what are these auctions anyway?
Russia currently runs a budget deficit. The government spends more than it collects: in just the first half of 2026, expenditures exceeded revenues by 5.73 trillion rubles. This imbalance is plugged mainly one way—through borrowing on the domestic market. Every week, the Finance Ministry goes to the exchange and sells federal loan bonds (OFZ). Essentially, these are IOUs: an investor (most often a bank or fund) gives the government money now, and in return receives interest (coupon payments) and repayment of the full amount in several years.
The mechanism is routine: a weekly auction where investor demand essentially sets the OFZ interest rates, and then the Finance Ministry selects bids. As long as the balance holds and investors have money for such loans, it works like a conveyor belt—in 2025 the Finance Ministry placed ruble-denominated bonds for a record 7.2 trillion rubles, 1.7 times higher than the year before. That's why the pause is not a technical detail, but a signal that the system is being reconfigured.
What does "stabilization" mean?
Formally, the Finance Ministry talks about "stabilization." In reality, it's a capitulation in the standoff with the market that dragged on all month. First, the ministry spent several weeks in a row canceling auctions, citing "heightened volatility." Then it held a placement that raised about 10 billion rubles instead of the usual hundreds of billions. Finally, on July 15, the Finance Ministry couldn't even sell a floater—a floating-rate bond that investors usually snap up most eagerly. After that, auctions were simply switched off, "until further notice."
And here we see a supply-demand imbalance. The Finance Ministry refuses to borrow at 15–16% annually: locking in such expensive debt for 10–15 years ahead means overpaying interest for years. But the market has stopped offering cheaper rates. The deal isn't coming together—and auction after auction falls through.
Why the market slammed shut
This is the key question, and the answer lies in a chain where one thing pulls another. In brief, it looks like this.
