Russian Railways (RZD) placed a debut issue of 30-year inflation indexed infrastructure bonds worth RUB 25bn, senior VP of the company Vadim Mikhailov told the press. Another RUB 25bn issue is going to be placed until the end of June, he added. Until the end of the year, RZD is going to place a total RUB 100bn of such bonds, in 15-, 20-, and 25-year issues. Total program of 12 issues registered on MICEX in May amounts to RUB 300bn (USD 10bn).

The bonds placed have a yield of inflation+1%, the first coupon rate thus amounting to 8.2%, Mikhailov said. While a number of domestic and foreign institutional investors were interested in the issue, state-development bank VneshEknonomBank (VEB) acquired the issue. CFO of RZD Pavel Ilyichev believes that private investors will be more interested in future tranches with shorter maturity. The funds raised from the bonds will be used to fund investment program projects, while debt servicing costs will be incorporated into 2014 tariffs.

The infrastructure bonds with maturity of up at least 20 years will be financed by the Pension Fund and the National Welfare fund with the intermediation of VEB. Previously Mikhailov also said that another RUB 80bn worth of infrastructure bonds might be issued in 2013-2014 to be purchased by the National Welfare Fund.

It must be noted that large issues of infrastructure bonds were discussed since the end of last year. The fact that the bonds are being issued and purchased by large state accumulated reserves such as Pension Fund and National Welfare Fund can be seen as a sign that EconMin and other proponents of softer budget policies are taking an upper hand on FinMin which safeguards a conservative fiscal stance. EconMin has continuously argued for spending on large infrastructure projects as a way to recover from current economic slowdown.