Banks increase the yield on yuan deposits and debt securities

“Kommersant” got acquainted with the “Financial Market Risk Review” of the Central Bank of the Russian Federation, analyzed the offers of banks in Chinese currency and interviewed experts.

According to the Central Bank document, a strong trend of increasing the yuan’s share in settlements of foreign and domestic markets (including the stock market) continues. From March 2022 to March 2023, the monthly transaction volume in Chinese yuan increased:

• Russian exporters from $0.5 billion to $6.9 billion (share in the export structure – 18%),
• Russian importers from $1.4 billion to $7.7 billion (share in the import structure – 27%).

The share of the yuan in April 2023 increased:

• in the spot foreign exchange market up to 36.1% (compared to 31.5% in 2022),
• in the OTC market at 22.3% (compared to 17.6% in 2022).

According to Banki.ru, the number of credit institutions that offer deposits and operations with yuan securities has increased by about 10: from 10 banks in 2022 to almost a hundred in the first quarter of 2023. At the same time, the profitability of almost all yuan banking products are growing as organizations need to attract new depositors.

Those wanting to place yuan have already taken advantage of options offered by the market last year, and new buyers “had to be motivated by higher yields,” says Alexander Afonin, head of bond market research at investment bank Sinara.

E.g:

• the yield on deposits of the largest banks is now 3.2-3.5% per annum,
• yield on two- or three-year bonds of first-tier issuers – 3.7–4%,
• the yield on four / five-year securities is 3.5-6.4% (for example, Sovcomflot’s debut issue promises 5% per annum, Yuzhuralzoloto’s reissue – 4%).
• the yield on a relatively new instrument for the Russian Federation, replacement bonds, is even higher: for example, the yield on Metalloinvest’s ordinary yuan bonds due September 2027 is 4.5% per annum, and replacement bonds due October 2028 are approximately 7% per annum (Rusbonds data).

Analysts do not expect another similar increase in profitability growth: rather, there will be “some compression” such as “washing or converting deposits into ‘unsympathetic’ currencies.”