Calculated risks

Calculated risks

Natalia Dembinskaya

The Central Bank a-gain sharply reduc-ed investments in US government bonds. Moscow has been systematically getting rid of th-ese securities since 2014, and the latest sanctions threats only speed up the process. Now the share of Treasuries in international reserves is less than a percent. Why Russia sold off almost all of the Am-erican national debt and where the released funds were directed – in the material of RIA Novosti.
To the minimum
The US Treasury Depa-rtment reports that Russia in November reduced investments in US government securities to $2.4 billion. In October it was 3.72, in September – 3.91.
These bonds are one of the key financial instruments of the White House, helping to offset the budget deficit. However, Russia is clearly not to be counted on here: treasuries have been sold almost completely.
Back in 2010-2013, Russian investments in US debt exceeded $140 billion. But after Washington announced sanctions in April 2014, they began to get rid of these papers. In 2018, the Central Bank undertook a massive sell-off, cutting the US Treasury portfolio by half at once, to $13.2 billion. Since then, the share of treasuries in Russia’s gold reserves has practically not increased.
Balanced portfolio
From time to time, investments increase slightly – this is necessary to balance the portfolio, but in g-eneral – they are consistently reduced. Now American paper is less than a percent of international reserves. The released funds were transferred to gold, as well as the euro and yuan.
This is the logical result of a policy pursued for a long time. Since October, the Ministry of Finance has continued to sell off, and dollar assets have fallen to record lows, says Eduard Bugrov, managing partner of the investment company GLS Invest.
There are several factors here. First, de-dollarization is taking place, reducing the dependence of the Russian economy on the US currency. Second, international reserves need to be diversified.
According to Mikhail Kogan, head of the analytical research department at the Higher School of Fina-ncial Management, rebalancing is a normal process for absolutely any portfolio, from an individual no-vice investor to an entire state. According to his forecast, in December the dyna-mics of treasuries (there are no such data yet) was also negative. This is a normal revision of interest in a particular investment object.
Calculate risks
However, the formation of reserves is not only a matter of market expediency. Diversification (euro, yuan, Swiss franc, as well as second-tier reserve currencies) increases the resilience of the financial system to external pressure. That is, by getting rid of the American public debt, Russia first of all minimizes sanctions and geopolitical risks.
It is already clear that relations between the two countries have escalated again and Washington is threatening Moscow with new restrictions. Russia is either “disconnected” from SWIFT, or they are promised targeted sanctions against banks. There are worse options.
“It cannot be ruled out that the States will decide to freeze Russia’s dollar assets and refuse to answer for debt obligations. Of course, in the wake of such rhetoric, it would be unreasonable to keep money in resources controlled by the opponent,” Eduard Bugrov points out.
Rational approach
At the same time, alth-ough the share of US government bonds in gold res-erves has become purely symbolic, this does not m-ean that everything should be sold. Treasuries are a highly liquid asset, they can be quickly and in large volumes converted into major world currencies, sold at any time. In addition, it is a convenient tool for securing obligations, for example, for transactions with other assets.
In addition, the vast majority of international settlements are still carried out in the American currency, it is the dollar that serves the main financial and commodity flows.
Another thing is that Russia deliberately moves away from systemic risk, and this is not only about geopolitics and sanctions. The very financial situation in the US raises questions among many investors. First of all, the huge debt, which is becoming more and more difficult to manage, almost 30 trillion dollars, confuses.
In August last year, Americans once again came up against the legally established ceiling of the public debt. Technically, this made it impossible for the country to borrow. By then, Treasury bills had already exceeded the size of the US economy—$28.5 trillion. As a result, the Ministry of Finance again raised the limit and switched the budget to the “vacuum cleaner” mode, launching a series of large placements of government bonds. They continue to lend money to Washington, but there are more and more fears whether they will be returned.
Strong reserves
At the end of 2021, Ru-ssia’s international reserves reached an all-time high of $630.5 billion. These highly liquid foreign assets are managed by the Central Bank and the government.
There is monetary gold, special drawing rights (SDRs), a reserve position in the IMF and funds in foreign currency. All this is used to cover the deficit of the balance of payments, influence the ruble exchange rate through interventions, payment of external loans, settlement transactions with other states, and the fulfillment of social obligations.
Gold dominates in recent years. At the end of June 2020, the share of the precious metal surpassed the dollar for the first time – 23% against 22%. Approximately one third of the assets is the euro, 12% is the yuan.
By the end of 2021, the Bank of Russia increased its gold reserves to 2.3 thousand tons (74 million ounces). This is about 133 billion dollars, 21.3 percent of the gold reserves. Such a high rate gives additional stability, provides reliability, diversification and growth in value. Now about a third of the reserves of developed countries are stored in gold.

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